HARARE – The Insurance Council of Zimbabwe (ICZ) says proposed capital levels for insurance companies by the Insurance and Pensions Commission (Ipec) are too high.
“ICZ is in agreement with Ipec that the current levels of capital for short-term insurers is too low. The market needs strong well-capitalised companies. They however, consider that the level suggested may be too high,” ICZ said.
“ICZ believe that capital should be risk-based subject to a realistic minimum probably $1 million,” the insurance body said.
Ipec is mooting an upward review of capital levels to $2 million for short–term and non-life insurers, $3 million for reinsurers and funeral assurers and $4 million for life assurers.
Currently, the minimum paid-up capital are pegged at $300 000 for short-term and non-life insurers, $400 000 for reinsurers and funeral assurers and $500 000 for life assurers.
“The capital levels are low…they are not adequate,” Ipec said.
The insurance regulator said the current situation with more than 26 players was healthy for the sector.
“You may say the market is oversubscribed in which case those with a competitive edge will do more business and remain viable. Those that lack innovation will be forced to exit the market,” Ipec said.
It however, said despite substantial growth, current economic challenges remained a hindrance to its progression.
“Since dollarisation, the insurance sector has steadily grown. However, the growth could be accelerated if the economy in general was also growing. Due to the sluggish growth in the economy, disposable incomes are low, leading to fewer individuals and companies purchasing insurance products. For many households, taking insurance policies is not a priority.”
In 2011, nearly 30 short-term operators jointly produced an aggregate gross premium written (GPW) of $110 million, a 60 percent increase from prior year’s $68,6 million.
Zambia with only eight short-term players had $174 million, with Mozambique at $90 million with seven registered companies.
In 2009, only 10 short-term insurers in Zimbabwe accounted for 88 percent of the industry’s business with 21 contributing just 12 percent.
1) What is ICZ’s position regarding plans by Ipec to up capital levels for the insurance sector ?
ICZ is in agreement with Ipec that the current levels of capital for short-term insurers is too low. The market needs strong well-capitalised companies. They however, consider that the level suggested may be too high. ICZ believe that capital should be risk-based subject to a realistic minimum probably $1 million.
2) With over 26 players in the short-term sector fighting for a $180 million market, as ICZ is it not oversubscribed?
Maybe yes, but I guess the public needs competition.
4) Kindly comment on concerns that there is collusion in the short-term insurance sector with most companies charging the same rates despite them having difference cost structures e.g third party insurance being charged at $35?
Third Party insurance is regulated by the ministry of Transport. The minimum recommended economical premium for RTA insurance is $30 per term. $5 is in respect of stamp duty and Traffic Safety Board Levy.
6) As ICZ kindly give us a general overview of the insurance sector taking into consideration the lack of disposable income among the general public?
Perhaps the best body to comment on this would be Ipec since they are privy to statistics in insurers’ performance but what we can say is that the performance of the industry has generally been tracking that of the economy. We follow the fortunes of our clients.