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Kudakwashe Mhundwa and Prince Chidzvondo
Zimbabwe’s insurance and pensions regulator, Insurance and Pensions Commission (IPEC), yesterday launched the Zimbabwe Integrated Capital and Risk Project (ZICARP) which is aimed at creating market discipline and improving confidence levels in the country’s insurance sector.

Currently, lack of confidence continues to haunt the country’s insurance and pensions industry due to the erosion of policy holder accounts which resulted from the conversion of value from Zimdollar to the United States dollars during the February 2009 period.

ZICARP, essentially consist of three pillars which include the Risk-based Capital Framework, Own-Risk and Solvency Assessment framework (ORSA) and the Market Disclosure Framework, which are all expected to be complete by second half of this year once industry consultations have been complete.

Addressing delegates during the launch ceremony, IPEC Acting Commissioner Blessmore Kazengura said the commission has appointed African Actuarial Consultancy (AAC) to spearhead the project by involving stakeholder participation in the industry.

“Motivated by the quest to develop a sound insurance regulatory and supervisory framework to enhance policyholder protection, the Commission has appointed African Actuarial Consultants (AAC) to develop an Integrated Capital and Risk Framework for Zimbabwe.

“We have called it an integrated project because it covers three main aspects namely, a Risk-Based Capital Framework, Market Disclosure Framework and an Own Risk and Solvency Assessment (ORSA) Framework for implementation in the Zimbabwean Insurance industry.

“The Commission is of the conviction that stakeholder involvement is critical for effective development and implementation of the envisaged integrated Framework, hence our decision to involve all insurance entities and other critical stakeholders at development stage,” said Comm Kazengura.

According to Comm Kazengura, through the Market Disclosure Framework insurers will be expected to provide information relating to their financial position and performance in a bid to protect policy holder accounts.

“Pillar Two of the Integrated Capital and Risk Project related to the Market Disclosure Framework. The Market Disclosure Framework is aimed at promoting consistent and comprehensive disclosures by IPEC’s regulated entities for the protection of insurance stakeholders and policyholders in particular.

“Through the Market Disclosure Framework, insurers and medical schemes will be required to disclose, relevant, comprehensive, adequate and timely information regarding their business activities, performance and financial position.

“Such disclosure is expected to enhance market discipline and understanding of risks to which an insurer is exposed and the manner in which those risks are managed. The integrated capital project will complement the Governance and Risk Management Guidelines already implemented by IPEC in the insurance industry,” he said.

The Risk-Based Capital Framework, Comm Kazengura said, will ensure the safeness and soundness of insurance players.

“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 does not eliminate minimum capital requirements. There will still be minimum capital requirements, the level of which, will be determined by the new framework.

“The framework is therefore, intended to determine the capital that each insurance company and/or medical scheme should hold, based on the risks that they assume. It will help to ensure that each insurer can withstand any risks it is exposed to and ultimately enhancing protection of policyholders.

“Therefore, it 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, 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, enable orderly exit of insolvent insurance companies from the market as well as improve confidence in the insurance sector.

“Through the development of Own Risk and Solvency Framework, which is premised on Pillar 2 of the Solvency II framework, IPEC is seeking to align the assessment of Solvency Capital for insurers and medical schemes with the risks that they face,” Comm Kazengura said.