Ipec calls out funeral assurers
THE Insurance and Pensions Commissions (Ipec) has urged funeral assurers to adhere to prudent investment practices by consistently holding assets that match their liability profiles. This comes as the sector continues to hold investments in equities, cash and money market instruments in very small proportions relative to the overall asset portfolio.
The trend has persisted for more than four consecutive quarters.
In a 2023 third quarter funeral assurers report, Ipec said the asset base for the sector remained highly concentrated in operational properties, which constituted 60,38% of the total assets as at September 30, 2023.
“The concentration in operational properties mainly arose from the need by the sector to invest in assets used for funeral service provision. The commission calls for prudent investment practices by funeral assurers, considering the need to continuously hold assets that match their liability profiles,” Ipec said.
“The sector continues to hold investments in equities, cash and money market instruments in very small proportions relative to the overall asset portfolio, a trend that has persisted for more than four consecutive quarters.”
During the period, total assets for the funeral assurance sector amounted to ZWL$30,81 billion, an increase of 23,13% from ZWL$25,02 billion reported in the previous quarter.
The regulator also reminded all funeral underwriters of the need to uphold the choice of the policyholder at the claim stage, to receive a cash benefit or funeral services as enshrined in the law.
This is stated under section 58(3)(a) of the Insurance Act [Chapter 24:07] and Circular 12 of 2023 on the Funeral Directive.
“Furthermore, funeral assurance players are required to always adhere to the requirement of Section 29 of the Insurance Act [Chapter 24:07] by maintaining separate policyholders’ and shareholders’ accounts. As at 30 September 2023, all funeral assurers were non-compliant with the minimum prescribed asset ratio of 10%, as stipulated by Statutory Instrument (SI) 206 of 2019,” Ipec said.
“Prescribed asset investments were very low as they accounted for an average of only 0,18% of the total sector asset portfolio. The commission is concerned by the continued non-compliance with prescribed asset requirements. Only two entities submitted compliance roadmaps, which are under consideration while the remaining five players are yet to submit roadmaps in line with SI 206 of 2019.”
The total investments in prescribed assets were ZWL$55,54 million against an expected minimum amount of ZWL$3,08 billion for the sector to be compliant with the 10% minimum prescribed asset threshold.
Overall, the funeral assurance sector recorded nominal gross premium written (GPW) of ZWL$21,1 billion during the period, a nominal increase of 540,3% from ZWL$3,29 billion reported in the comparable period the previous year.
Inflation adjusted GPW for the sector increased by 440,97% to ZW$17,82 billion during the period under review from ZWL$3,29 billion in the comparable period.