ZIMBABWE’S funeral assurers are struggling to comply with prescribed assets regulatory requirements despite the directive by the regulator for all entities to conform.
Prescribed assets are bonds or securities issued by the government, local government, quasi-government organisations or any other bond that may be accorded the prescribed asset status.
The Insurance and Pensions Commission (Ipec) is constantly monitoring the uptake of prescribed assets through the submission of monthly updates by players.
Prescribed asset investments are an important resource mobilisation tool for funding projects of national importance for socio-economic development.
Under Statutory Instrument 206 of 2019, the sector is supposed to adhere to a 10% prescribed assets status.
However, according to Ipec’s first quarter report, the funeral assurance sector was sitting on 21% against the 10% that is required.
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"The commission is concerned by the continued non-compliance levels with prescribed asset requirements. All funeral assurers were non-compliant with the minimum prescribed asset requirements as at 31 March 2023 with an average prescribed asset ratio of 21% against the required ratio of 10%, as stipulated by Statutory Instrument 206 of 2019," the regulator said.
The commission said it was continuing to recommend the development of sector-specific projects that speak to the sector’s needs, for possible conferment of prescribed asset status as this will go a long way in enhancing compliance.
The commission vowed to escalate measures to cause compliance.
During the period, the total amount invested in prescribed assets was only $17,23 million against the required minimum amount of $835,74 million to comply with the minimum prescribed asset threshold of 10%.
Total technical liabilities increased by 3,78% in nominal terms from $2,57 billion as at December 31, 2022 to $2,67 billion as at March 31, 2023, with future policyholders’ benefits being the major component.
“The funeral assurance sector players should always be compliant with all applicable laws and regulations, particularly the minimum capital requirements and prescribed asset ratios.
“The sector is urged to revisit its business model to align with the recently published funeral model directive to ensure compliance and ward off increased competition from the life assurance sector," Ipec said.
Ipec urged the sector players to offer relevant products that address the needs of the insuring public.
Funeral assurers should also have in place reassurance arrangements as a risk management tool to manage loss experiences, it said.
The nominal consolidated gross premium written (GPW) by the funeral assurance sector for the quarter under review amounted to $2,62 billion, an increase of 274,52% from the prior quarter.
The inflation adjusted GPW increased by 99,64% to $1,40 billion for the period under review.
The absolute local currency GPW during the period was $2,17 billion, accounting for approximately 82,72% of the consolidated GPW.