ZIMBABWE’S insurance regulator is working on a guidance paper on treatment of the sector’s assets and liabilities in response to the country’s currency reforms, an official has said.
The Insurance and Pensions Commission (IPEC) has been trying to reform the sector as part of recommendations of a commission of inquiry tasked to look at the conversion of Insurance and Pension Values from ZW$ to US$ when the country dollarised in 2010.
But before those recommendations could be enforced, the country has gone through another phase of currency reforms, introducing a new local currency in February. IPEC acting commissioner Blessmore Kazengura told the Zimbabwe Association of Pensions Funds (ZAPF)’s 44th annual conference last week in Victoria Falls that there was no common understanding among stakeholders on the findings of the commission of inquiry.
“The major constraint in the implementation of the proposed compensatory framework, among other issues, is coming up with an appropriate and objective index for the recalculation of insurance and pensions benefits .The commission is, therefore, working on some form of indexation model for application,” he said.
Kazengura added that it was critical to adapt a consultative approach in light of complexities brought about by the recent episode of loss of value associated with currency reforms announced through the February 20, 2019 monetary policy statement.
“The import of the guidance is the need for pension funds and insurers to revalue pension and insurance liabilities in a manner that apportion asset revaluation surplus in an equitable way between pension funds, policyholders and shareholders, where applicable”.
“The paper, in a bid to restore confidence within the sector, is proposing that fund members are given the option of early partial access to their pension benefits, and partial commutation before retirement”.
“For example, the following commutation levels are being proposed. Fund members under 40 years to get 10% of accumulation up to $5 000 provided they would have contributed for at least 10 years”.
“Above 40 and less than 50 years to get 20% to maximum of $20 000. Above 50 years to get 50% of their pension accumulation up to a maximum of $50 000”.
The conference, which ran under the theme Retirement Savings in an Uncertain Economic Environment, sought to answer questions on the relevance of pensions in the face of a myriad of challenges the industry was facing.
Among its recommendations, the Justice Smith-led commission called for a review of the Insurance Act, the Pension and Provident Funds Act, the Insurance and Pensions Commission Act and the National Social Security Authority (NSSA) Act to protect people’s savings.
The commission also suggested that government brings NSSA and medical schemes under the purview of IPEC to enhance transparency, accountability, protection of policyholders and to consolidate the regulation of insurance and pension businesses under one statutory body.
The inquiry was conducted over an 18-month period from September 2015 to March 2017 and covered a 20-year period from 1996 to 2014.