PIA in reg­u­la­tory irony, for hold­ing un-in­sured as­sets

Zambian Business Times - - FRONT PAGE -

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.

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