PIA in regulatory irony, for holding un-insured assets

ZAMBIA’s Pensions and Insurance Regulator, the Pensions and Insurance Agency - PIA has been caught up in an ironic situation were the agency was found carrying assets that it had neglected to place comprehensive insurance on, when its core mandate is to regulate the country’s insurance industry.

According to a report made available to ZBT, PIA which provides subsidized staff house purchase loans to its staff breached section (8) of its in-house House Loan Agreement - HLA which stipulates that employees shall ensure that the purchased houses are comprehensively covered with respect to insur-

ZAMBIA’s Pensions and Insurance Regulator, the Pensions and Insurance Agency - PIA has been caught up in an ironic situation were the agency was found carrying assets that it had neglected to place comprehensive insurance on, when its core mandate is to regulate the country’s insurance industry.

According to a report made available to ZBT, PIA which provides subsidized staff house purchase loans to its staff breached section (8) of its in-house House Loan Agreement - HLA which stipulates that employees shall ensure that the purchased houses are comprehensively covered with respect to insurance.

In addition, the PIA staff loan provisions stipulate that insurance should be taken on any staff loan and to be incurred by the applicant. However, during the review by the Auditor Generals Officers, it was observed that no insurance was taken on the house loans issued to officers amounting to about K1.3million and the properties pledged as security were not comprehensively insured.

“This is an inditement on PIA as a regulator who is supposed to lead the market by example as they provide the regulatory oversight. It is ironic that the institution that is supposed to ensure that the insurance industry adheres to regulatory provisions itself not following through by putting its own house in order, this is what makes some of these regulators not gain market respect, stated our source from an insurance broker who is not authorized to speak publicly.

The Auditor General’s visit undertaken to a randomly selected fourteen (14) Pension Scheme Sponsors and five (5) Insurance Brokers, in February 2017, revealed that there was inadequate Monitoring and Supervision of the Insurance entities and the Pension Scheme Sponsors.

Some of the findings include:

Failure to Enforce Scheduled Preparation of Financial Statements

Section 45 (2) and (3) of the Insurance Act of 1997 states that an insurer shall, within ninety days after the end of each financial year, cause to be prepared in accordance with the regulations audited accounts which have been properly prepared in accordance with the regulations; and give a true and fair view of the state of the insurer’s insurance business in that financial year. It was however observed that two (2) Insurance Brokers had not prepared and submitted financial statements for the year ended December 2016 to the Pensions and Insurance Authority as at 31st August 2017 and no regulatory action had been taken.

Failure Enforce the Preparation of Fourth Quarter and Annual Returns

Section 21 (7) of the Insurance Act states that a broker shall prepare, a statement, duly signed, to the registrar as at 31st March, 30th June, 30th September and 31st December of each year, within two (2) months after the end of the period to which it relates. However, it was observed that one insurance broker had not prepared both 2016 fourth quarter and annual returns as at 31st August 2017. In addition, one insurance broker had not prepared 2016 fourth quarter returns while another broker had not prepared 2016 annual returns as at 31st August 2017.

Failure to enforce Market Players to adequately Protect Members Interest

According to Sections 5 (1) ‘c’ and ‘d’ of the Pensions Scheme Regulation Act No. 28 of 1996, the Pensions and Insurance Authority is responsible for regulating and supervising the establishment and management of occupational pension schemes and insurance businesses, and protecting the interests of members and sponsors of occupational pension schemes and shareholders and policy holders.

However, visits to three (3) pension scheme sponsors revealed that the Luapula Water and Sewerage Company Ltd Pension Trust Scheme had outstanding remittances of pension contributions to ZSIC Life Limited amounting to K842,452 as of March 2017. There were also similar un-remitted amounts from Tazara Pension Trust Scheme and the National Heritage Conservation Pension Trust Scheme, an indication of the systemic risk existing in the pensions sector.

PIA has however been astute in managing its financial position as it has posted surplus funds of about K8 million in the past three years. The insurance and Pensions sector has long term assets which needs to be leverage to spur development in Zambia.

If well regulated, it has the potential to contribute effectively to funding of viable long term capital intensive national projects without the need for the country taking up unnecessary external debt. The combined Pensions and Insurance industry is critical and needs to be given the special attention it deserves.