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Tawanda Musarurwa Senior Business Reporter
Insurance companies that provide both life assurance and non-life assurance business must hold minimum capital of $112 million, according to Statutory Instrument 59 of 2020.

This comes as Government has effected the new minimum capital requirements for the country’s insurance entities, which were initially proposed by Finance and Economic Development Minister Mthuli Ncube last November.

In respect of new capital requirements for insurance firms, insurers that carry out life assurance business (including funeral assurance) are required to hold $75 million from $5 million, while those that provide non-life insurance business should hold $37,5 million from $2,5 million.

According to SI-59 of 2020, local insurance companies that provide reinsurance or reassurance business are required to hold a minimum capital requirement of $75 million.

Insurers which “carry on life assurance solely for the purpose of issuing funeral policies” are now required to have a base of $62 million, while insurers that provide micro insurance only, are required to hold $4 million.

Inflationary pressures, largely attributable to currency depreciation, have complicated the operating environment for insurers and necessitated the upward review of minimum capital requirements.

Last February, the country’s monetary authorities responded to calls for a free floating exchange rate system and set up the foreign currency interbank market.

In June, the Government effectively ended the long-standing multi-currency system and re-introduced the Zimbabwe dollar through Statutory Instrument 142 of 2019.

However, between February 2019 and March 2020, the local currency has moved from trading at a rate of 2,5 to the United States dollar, to around 18 to the US dollar on the interbank market.

Minister Ncube, while making the proposals in the 2020 National Budget last year, said it was important to ensure that insurers are well-capitalised to protect value for policyholders and pension members.

“The obtaining macro-economic environment has necessitated upward review of minimum capital requirements for different players in the insurance industry to ensure that entities are well-capitalised for the protection of value for policyholders and pension members,” he said at the time.

Meanwhile, SI-59 of 2020 has also prescribed the minimum capital requirement for insurance brokers, that is, “every registered insurance broker shall effect and maintain a professional indemnity insurance with a limit of liability of not less than (a) $1,2 million; or (b) fifty per centum of such broker’s net brokerage income in his or her preceding year; whichever is greater”.