Ipec to adopt risk-based supervision framework



The Insurance and Pensions Industry (Ipec) plans to adopt a risk-based supervision framework, moving from the current compliance-based model in a move that is expected to improve the regulator’s oversight of the industry.

The new framework should determine the capital that players in the sector may hold, based on the risks that they assume.

“While the risk-based capital framework will address weaknesses of the current capital framework, it is important to bear in mind that the implementation of the risk-based capital framework will not eliminate minimum capital requirements. There will still be minimum capital requirements, the level of which will be determined by the new framework,” Ipec’s acting commissioner Blessmore Kazengura said.

“The risk-based capital regime will be applied to insurance companies with a view to improve the safety and soundness of insurance companies in a bid to foster protection of policyholders who form part of an early warning system with a supervisory ladder of intervention that enables Ipec to timely take necessary measures in the interest of policyholders.”

The framework being developed by the African Actuarial Consultants, appointees of Ipec, would cover market disclosure and an own risk and solvency assessment framework for implementation in the Zimbabwean insurance industry.

Ipec director for pensions Josphat Kakwere said the new framework would ensure that each insurer withstands any risks they are exposed to and ultimately enhance the protection of policyholders.

“We no longer look at insurers as homogenous. We look at inherent risks as levels differ from entity to entity. We recognised the need for the industry to develop risk and assessment framework. When we look at an entity, we look at the quality risk management of the insurer. The capital should speak to the risk that the entity has,” he said.

“Questions have been raised as to how Ipec reached the capital requirements. There was no scientific way of doing it and a number of players fell along the way. As a regulator, we are saying yes, you may have capital, but having capital is not guarantee that business will succeed. We are moving now from the compliance-based to risk-based per vision, laying foundation of risk-based capital requirements.”

Consultations with the industry players will now commence, with the target date for completing the project being February 29, 2020.