The Insurance and Pension Commission (IPEC) says it will continue to close errant, weak and unsound financial security-giving operators to protect the insuring public, after initiating a clean-up in the last three months, which reduced life assurers to only two – Old Mutual and Afre Corporation’s First Mutual Limited.
The clean-up, from which only two short-term insurers have bounced back, has also cut down the entire insurance, pensions and providence industry to 75 players.
Short-term insurers still dominate the industry with 26 registered operators, followed by insurance brokers with 25, eight life assurers, eight short-term reinsurers, six funeral assurers and two life assurers.
Sixteen of the 77 deregistered insurance companies failed to meet the minimum capital requirements set by the commission, while the other 56 were dormant and had not been operating for at least three years.
IPEC has only re-registered two short-term insurers, Regal and Jupiter, which were statutorily discontinued in June, after they ramped up their minimum capital to at least $300 000, currently required to operate.
One more – Gallant Insurance – is challenging its closure in court.
Manett Mpofu, commissioner of insurance, pension and provident funds, says IPEC is currently reviewing every player in the industry to ensure compliance with minimum capital requirements and ethical conduct.
“Capital adequacy is critical to ensure that the public is protected, and as long as insurance companies fail to raise the capital requirements they will not be allowed to operate,” Mpofu said.
“The compliance with capital adequacy is stipulated in the Insurance Act, Statutory Instrument 183 of 2009 and various circulars issued by the Commission.
Failure to comply with these has led to deregistration.”
At present, the minimum capital requirements are $300 000 for shortterm insurers, $400 000 for reinsurers and funeral assurers and $500 000 for life assurers.
A 2009 report on the short-term industry by IPEC shows that many operators accepted risk, which surpassed their underwriting capacity, and many had to transfer the bulk of the risk to reinsurers, mostly those outside the country, resulting in low net premium income (NPI).
“Ceded reinsurance premiums were 59,82% of the GP income with a retention ratio of 40,10%.
“Generally the retention ratio was low as direct insurers’ balance sheet values could not sustain the risk thereby relying more reinsurers,” IPEC said the report.
For the whole of 2009, Zimbabwe’s short-term insurance industry’s aggregate gross premium written (GPW) amounted to $68 598,180, but net premium income (NPI) was only $27 440,148, and this lifted by less than five players, according to IPEC’s 2009 report on the short-term industry.
Only 10 companies accounted for 88% of the business with 21 contributing just 12%.
The risk insured was dominated by the motor vehicle and fire classes.
Technical liabilities — debts and claims — also surpassed both balance sheet values and owner’s capital.
Last week, IPEC deregistered 28 insurance brokers, 12 short-term insurance companies, 10 life assurance companies, six reinsurers and five funeral assurance companies for failing to meet the minimum capital requirements, errant conduct and failure to use registration certificates.
The most prominent included Orion Insurance Company, Bliss Insurance Brokers and the National Insurance Company of Zimbabwe.
Mpofu said the commission set the thresholds after extensive consultations with stakeholders, taking into account various submissions, concerns and considerations.