First Mutual, Ipec tiff rages on
LIFE assurance company First Mutual Holdings Limited (FMHL) has approached the High Court seeking a review of a corrective order issued by the Insurance and Pensions Commissions (Ipec), NewsDay Business can report.
Early this year, FMHL announced that it had received an order for corrective measures to be implemented by the regulator following its alleged defiance to the law on the separation of insurance and pension businesses.
This followed the launch of an Ipec forensic investigation into the affairs of First Mutual Limited (FML), a subsidiary of FMHL, over its failure to separate shareholders and policyholders assets.
In a cautionary statement yesterday, FMHL said it was not in agreement with the findings of the forensic auditor, BDO Chartered Accountants, which found it guilty of breaking the law.
“FML received a corrective order from Ipec which is based on the findings of the forensic auditor, BDO Chartered Accountants. The order directs FML’s shareholders to pay significant sums in Zimbabwe dollars and in United States dollars to the policyholders in respect of perceived actual and potential losses, as assessed by BDO,” the statement read in part.
“FML respectfully disagrees with the findings in the BDO report and in the Ipec corrective order and believes its submissions were not properly considered. Interpretations of fact, accounting standards, legal and actuarial principles, as well as currency conversion issues are in dispute.”
The corrective order iseeks to identify assets that were misappropriated from policyholders to shareholders or vice versa, quantify the assets that may have been misallocated and apportion them to their rightful owners, and enhance compliance with the legal requirements for asset separation as a way of enhancing good governance in the insurance and pension sector.
The group said FML was now seeking input from independent third-party professionals to resolve areas of disagreement.
“Accordingly, the boards of both FML and FMHL are exploring all avenues to find a way forward. Meanwhile, in order to protect FML’s legal rights, an application for review of the corrective order has been filed with the High Court,” it said.
“Notwithstanding the institution of legal proceedings, which has become unavoidable to safeguard FML’s rights, both FML and FMHL will continue to work with the regulator and with the parent ministry to resolve the issues.”
The group said it remained committed to the service and protection of its policyholders, and balancing the interests of all stakeholders.
Separation of assets by pension funds and insurance companies has been identified as a key pillar in unlocking value for pensioners as it has become difficult to effect compensations on monetary asset losses in the face of such catastrophes as hyperinflation.
While there have been arguments on value erosion on the monetary asset, the regulator is on record saying the loss of value being sought should be strictly on monetary assets because there are properties and equities that can be revalued and revaluation gains redistributed to pensioners.