Zimpapers Logo

Tawanda Musarurwa

Significant progress has been made in strengthening the local regulatory framework for the insurance and pensions sector, the Insurance and Pensions Commission (IPEC) has said.

The two sectors are a vital cog in any country’s financial system.

Insurance firms and pension funds are not usually perceived as being a significant potential source of systemic risk, but following the hyperinflationary period circa 2009 and the resultant change in functional currency from the Zimbabwe dollar to a multi-currency system resulted in clients and pensioners losing their hard earned monies.

Poor regulatory enforcement and demonetisation of the local currency were largely blamed for value erosion by the Justice Smith Commission of Inquiry, which was appointed in 2015 to probe the conversion process.

The Justice Smith Commission of Inquiry came to the conclusion that “there was a huge loss of value to insurance policyholders and pensioners owing to failure by Government, the Insurance and Pensions Commission (IPEC) and the industry to set up a fair and equitable process of converting insurance and pension values from Zimbabwe dollars to United States dollars.”

IPEC Commissioner Dr Grace Muradzikwa told stakeholders during the institution’s virtual annual general meeting this week that progress had been made in the enhancement of existing laws, as well as the development of new regulatory frameworks.

“We updated the Bills to incorporate the Commission of Inquiry recommendations and benchmark the Bills with international best practices,” she said.

As at the end of June 2020, the Pensions Bill was before Parliament, while the drafting of the Insurance and IPEC Bills was being finalised.

Several adjustments in the current Pensions and Provident Act — as a case in point — contained in the Bill seek to address problems ranging from the lack of operational independence in some of these funds, poor quality of board structure and board appointments, failure to deal with conflict of interest at board level, capacity limitations of the regulator, absence of policy on troubled institutions, capital adequacy determination criteria, absence of disclosure measures and accountability and transparency in the industry as a whole.

There has also been a lot of new regulations with regards to the currency and other developments that have been taking place in the macro-economy. The regulations were aimed at ensuring that insurance policyholders and pension fund members are treated in a fair and equitable manner on a complicated operating environment.

“We also issued two statutory instruments, one on prescribed assets and the other on special exemptions to the insurance industry to write certain categories as foreign currency business,” said Dr Muradzikwa.

“In terms of the enforcement of the guidelines on the distribution of revaluation gains, we are currently receiving the actuarial report. The review of all our supervisory manual and frameworks to align them with international best practices, there has been a lot of work done around this, and we continue to focus on this together with our board.”

The insurance and pensions regulator issued 10 circulars covering a number of regulatory issues to the market, as well as developing six supervisory frameworks, manuals and policies. Over the past year, IPEC also made some headway in implementing institutional reforms. The Commission moved to establish an actuarial department, a legal department, a procurement department, and a research and development department.

Dr Muradzikwa also said the commission was widening its scope to deal with issues around the enforcement of Anti-Money Laundering (AMT) and Combating of Financing of Terrorism (CFT) laws in the insurance sector.

Zimbabwe is a member of the Financial Action Task Force (FATF) Global Community, which is responsible for setting and continuously updating international standards on Anti-Money Laundering and Combating Financing of Terrorism.

Zimbabwe’s fiscal and monetary authorities have increased efforts to ensure that the country is compliant.

“AML and CFT issues we realise that we have not been giving them focus, that’s why we have them as a project within the Commission” said the IPEC boss.

Last year, IPEC carried out an AML/CFT National Risk Assessment for the industry.

The regulator participated all AML/CFT National Task Force meetings and in the AML/CFT Advisory Council; and incorporated AML/CFT milestones in its strategic plan.