IPEC mulls risk-based capital framework
THE Insurance and Pensions Commission (IPEC) is working on a risk-based capital framework that is aimed at reducing minimum regulatory capital requirements that an insurer is supposed to meet based on the type of risk that their books carry, as the insurance regulator moves to increase the country`s insurance penetration rate.
Currently, short-term insurers and funeral assurers are obligated to meet minimum capital requirements of about $2,5 million while life assurers should meet $5 million threshold.
According to official figures released by IPEC in its 2018 third quarter performance report, six out of nine funeral assurers failed to meet the minimum regulatory capital requirements of $2,5 million as the capital requirement is too large for their books to handle.
The bulk of those that failed to meet capital requirements are small businesses namely Passion, Ruvimbo, Vineyard, Sunset, Orchid and Foundation, while bigger funeral assurers including First Funeral, Doves and Moonlight in the same category.
Acting IPEC Commissioner Blessmore Kazengura said the framework will give room for micro-insurance firms to flourish and grow the business operations to sectors which are currently underserviced in order to grow the country`s insurance penetration.
“As IPEC, we saw it necessary that for us to ensure deep financial inclusion, there is need for us to streamline and provide proper regulatory framework for our insurance industry to operate in, so regarding the micro-insurance business there are statutory instruments that were made in 2018 that will govern and monitor the operations of micro insurers.
“We will continue to provide more room for micro insurers to flourish especially by using a Risk Based Framework that we are currently working on, which reduces the principal of proportionality where we are saying that with the current regulations we have been putting caps in terms of capital requirements for insurers to register,
“This is to say if you are a non-life insurer you are required to have a capital of $2,5 million but if you are a life insurer you are required to have $5 million in terms of capital but we are saying if you are a micro insurer based on the type of risk that you are carrying we are going to be relaxing those capital requirements so that you may be able to cater for those sectors that are currently underserviced,” said Comm Kazengura
The commission expects to grow the Zimbabwe`s insurance penetration rate from the current 4,7 percent to about 20 percent by 2020
Zimbabwe`s micro-insurance sector boasts of a potential market of between 3-4 billion policies generating between $30-$50 billion in annual premium revenue. Informed by the National Financial Inclusion Strategy, 2016-2020 which identifies insurance as one of the critical players in the financial services sector, the Insurance and Pensions Commission in 2017 came up with the micro-insurance strategy as a way of enhancing financial inclusion through insurance targeting the previously excluded population.
The previously excluded population includes small-to-medium enterprises, small scale farmers, vendors and other low income earners.
In the African continent, a recent report on the Landscape of Micro-insurance in Africa Report indicates that $647 million was underwritten under Micro-insurance, from 62 million people covered.
Results of a Finscope survey done in 2014, show that 70 percent of adults in the country were not insured.
Of the 30 percent with insurance, 77 percent of it was accounted for by funeral insurance.