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Golden Sibanda Senior Business Reporter
SOME insurance firms have not been subjecting directors to fit and probity tests as required by law, exposing clients and the multi-billion dollar industry to risk posed by executives or senior managers with questionable capacity or integrity, it has been learnt.

Insurance companies and pension funds held over $15 billion, cumulatively, as at the end of September last year, according to official data.

The Insurance and Pension Commission (IPEC) on Thursday issued a directive, circular number 3 of 2018, reminding all insurers and their agents that the law obligated them to subject directors to fit and probity tests.

Fitness tests usually seek to assess the competence of managers and directors and their capacity to fulfil the responsibilities of their positions while propriety tests seek to assess their integrity and suitability. IPEC commissioner Mr Tendai Karonga, said the rationale behind issuance of the directive to insurance firms, reinsurers and brokers was to clarify to all regulated entities that the fit and probity tests must be undertaken on an ongoing basis and not only at registration level.

“Every time they want to appoint an official to any of the positions cited in the legal provisions, those appointments must be approved by IPEC.

“The regulated entities have been complying with the provisions at registration level. However, the commission noted that some have not been complying with the said provisions on an ongoing basis,” Mr Karonga said.

The regulator said whilst the insurance companies subjected directors to the fit and probity tests, when new directors are to be appointed after registration of the company, they should still be subjected to the same test in terms of Statutory Instrument 183 of 2009.

“The directive on corporate and risk management for insurance companies also makes it a requirement for directors or senior manager appointments to be approved by IPEC on an ongoing basis,” he added.

In the circular, number 3 of 2018, Mr Karonga said that in terms of section 5A of Statutory instrument 183 of 2009, it is a requirement upon application for registration as an insurer or broker to furnish the commission with the director’s declaration, indicating that the said director is a fit and proper person to hold the office of a director of the company. This condition of registration must be maintained on an ongoing basis.

“Upon change of a director by an insurer or broker, the insurer or broker must forward, to the commission for approval, the proposed new director’s declaration, to the effect that he or she is a fit and proper person to hold the office of a director for the insurer or broker,” he said.

According to IPEC, in terms of Clause 4.3.2 of the directive on corporate and risk management for insurance companies, it is a requirement that any director, senior manager or head of a control function appointed by an insurer be, in writing, approved by the commission.

“This is all meant to ensure that persons who hold the office of director, senior managers or head of any control function for insurers and brokers are fit and proper to hold such an office,” Mr Karonga said.

To determine competence, formal qualifications, previous experience and track record are some of the elements focused on by regulators such as IPEC. To assess integrity and suitability, elements considered include criminal record, financial position, civil actions against individuals to pursue personal debts, refusal of admission to, or expulsion from, professional bodies, sanctions applied by regulators of other similar industries, and previous questionable practices.