The pensions industry is in the process of developing an asset valuation guidance amid concerns that some players within the sector could be transferring policyholder assets to shareholders.
This comes as the value of both sectors’ combined assets dwindled by around 90 percent from US$9,4 billion at the end of 2018 to US$1,4 billion as at the end of September 2019.
Said Insurance and Pensions Commission (IPEC) pensions director Joshpat Kakwere: “With the (valuation) guidance, which we are working on, it will deal with the issue of trying to address the possible of transfer of value from the policyholder to the shareholder.”
IPEC Commissioner Dr Grace Muradzikwa, said the regulator is working with agencies such as the Valuers Council of Zimbabwe and the Actuarial Society for Asset Valuations.
“The current practice is that you get three valuations, but there has never been an explanation as to why we are getting three valuations. If there was a standard you would expect to get the same valuation from the valuations, but it has never happened.
“We are saying, you are dealing with policyholder’s assets, and we are worried when you see assets moving from US$9,4 billion to US$1,4 billion. So the guidance that we are coming up with is in consultation with the Valuers Council of Zimbabwe, which is for property valuations, and then with the Actuarial Society for Asset Valuations. We are hoping that at least we will eliminate the inconsistencies.”
She added that they expect the guidance to inform the reporting as at December (2019).
Although the weakening of assets within the pensions and insurance sectors can be partly attributed to the currency policy adjustments that have taken place since the beginning of the year and the lack of a valuation guidance for the sectors, another key contributor may be poor corporate governance.
According to the Organisation for Economic Co-operation and Development (OECD) guidelines for insurers’ governance — which were prepared by the OECD Insurance and Private Pensions Committee, and adopted by the OECD Council on April 28, 2005 — company boards should play a key role in protecting policyholder assets.
In Zimbabwe, the enforcement of separation of assets between shareholders and policyholders to avoid transfer from category to another is one of the key recommendations that came out of the Justice Smith Commission of Inquiry.
Meanwhile, the value of assets owned by the country’s pension funds increased 34,23 percent to $9,45 billion in the quarter ending September 30, 2019 compared to the previous quarter, the latest IPEC report shows.
This was largely attributable to revaluation of asset values following Zimbabwe’s currency reforms this year which saw the country move from use of multi-currencies to local currency.
“The increase was mainly driven by a spike in the values of investment property and equities. The increase in investment property was mainly on account of revaluations of property values from US dollar to Zimbabwe dollar following currency reforms,” said IPEC.
The report also showed that arrears in pension benefits increased from $77,77 million as at 30 June 2019 to $87,07 million as at 30 September 2019, while unclaimed benefit liabilities marginally declined from $33,75 million to $32,44 million.
And in the nine months to September, the industry’s total income was $2,69 billion, which was up on earnings for the same period last year.
Total industry expenditures amounted to $341,84 million, resulting in a financial surplus of $2,34 billion.