Increased Calls For Safeguarding Pensions In Insurance Industry As 356k Policies Lapse

Tinashe Muyambo, the group chief executive at Masawara, one of Zimbabwe’s largest insurance industry players, has called for measures to be put in place to protect pensions and prevent a repeat of the losses experienced a decade ago, as 356 055 policies lapsed in late 2022.

Speaking at the 2023 Zimbabwe Independent Insurance Survey and Awards, Muyambo stressed the need for insurers and pension funds to “ring-fence” savings and protect them from shocks that could potentially harm the volatile economy. This would involve protecting savings from losses incurred by riskier operations. Muyambo emphasised the urgency of implementing such measures to regain confidence in the sector, which has been dented by policyholders sitting on the fence. He said:

 If we are serious (about) the insurance industry underpinning growth in this market, how can we ring-fence this industry from fluctuations?

How can you do it in a manner that is actionable? . This conversation not only needs to happen, but needs to be executed as quickly as possible because 2030 is not far and if we want to get there, we need to start picking up the pace on some of these matters.

Tinashe Muyambo was referring to President Emmerson Mnangagwa’s Vision 2030 roadmap, which aims to transform Zimbabwe into an upper-middle-income economy.

Following the loss of savings in 2009, the government commissioned a commission of inquiry, led by Justice George Smith, which found that US$5.86 billion worth of pensions had been lost. The commission recommended that the sector compensate victims, but insurers and pension funds have struggled with compensation. Last year, the government called on parliament to pass legislation to put the recommendations into action.

Former finance minister Tendai Biti, who oversaw Treasury during the insurance policy conversions in 2009, has criticized insurers for being reluctant to redeem pensioners. He urged the Finance Minister, Mthuli Ncube, to urgently enact a law that puts into effect the recommendations of the Justice Smith Commission of Inquiry and compensates pensioners who lost their US dollar savings. Biti emphasised that the recommendations need to be implemented immediately to restore confidence in Zimbabwe’s insurance and pensions sectors. Muyambo, in turn, stressed the urgency of implementing measures to protect pensions and build investor confidence in the sector. He added:

A stable political and economic environment that fosters investor confidence and encourages growth; efficient regulation and supervision to ensure financial stability and protect consumers and innovative products and services that meet the needs of consumers and businesses.

According to the survey, the insurance and pensions industry in Zimbabwe requires greater support for its development, given the expected continuation of the depreciation of the local currency. The survey predicts that the country will continue to experience foreign inflation spill-overs throughout 2023, with a sharp increase in food prices already feeding into domestic consumer prices. Unplanned government expenditures as the country moves into electioneering mode are also expected to drive an increase in the Zimbabwean dollar money supply, which may lead to a rapid deterioration of the exchange rate in 2023. It further reads:

Waning confidence in the local unit will also trigger full dollarisation as the general population will regard monetary amounts not in terms of the local currency but in terms of a more stable foreign currency. There is also evidence that most prices are being quoted in US dollars while most households and individuals prefer to keep wealth in non-monetary assets (real estate and commodities) or in a relatively stable foreign currency.

In April, an Insurance and Pensions Commission report said 356 055 policies lapsed during the final quarter of last year, as markets struggled to keep pace with a deteriorating economic crisis.

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