1. Where Does the Future of Zimbabwean Insurance Regulation Lie?
Iiz THE FUTURE VISION OF INSURANCE LEVERAGING OUR PAST TO PREPARE FOR THE FUTURE
Where Does the Future of Zimbabwean Insurance Regulation Lie?
IIZ Annual Conference 2015
(Josphat Kakwere)
Elephant Hills Resort – Victory Falls
9 November 2015

2. Outline Insurance Industry Architect Insurance Business Trends
Responsibilities of Business entity
Evolution of regulation
Regulatory Drift
Regulatory Concerns
Environmental Factors
Regulatory Developments
Solvency II
Regulatory Implications
Conclusion
Insurance and Pensions Commission

3. Architect of the Insurance Industry
Insurance and Pensions Commission

4. Business Trends
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5. Responsibilities of a Business Entity
SOCIAL RESPONSIBILITIES
ECONOMIC LEGAL ETHICAL DISCRETIONARY
MUST DO SHOULD DO
HAVE TO DO MIGHT DO

6. Responsibilities in Order of Priority?
Satisfy the economic responsibility in profitable manner
Duty to be compliant to legislation to ensure continued existence
Fulfil social responsibilities: ethical/discretionary
Fiduciary responsibility – insurers handle public funds hence need to regulate their activities
Insurance and Pensions Commission

7. Insurance and Pensions Commission

8. Evolution of Regulation
Today’s discretionary may become tomorrow’s ethical and ethical may become the future’s legal responsibilities
Insurance entities should therefore fulfil their economic goal within the regulatory constraints among other factors
Regulation has been lagging behind developments in the industry resulting legislative drift
Mombe muforo
Insurance and Pensions Commission

9. Regulatory Drift Adopted from Johnson, Scholes and Whittington (2008)
Amount o f
Change
Time
Environmental
Legislation Drift
Calling for major
changes to legal
framework
Incremental
Changes to
Legislation
2015
Adopted from Johnson, Scholes and Whittington (2008)

10. Sources of Regulatory Drift
Out-dated Laws
Inadequate regulatory capacity results in a regulator;
Failing to enforce existing laws
Being reactive instead of being proactive
Insurance and Pensions Commission

11. Some Observed Regulatory Concerns
Poor Corporate Governance Practices in owner managed business and insurance entities existing in group structures
Conflict of between shareholder and policyholder interests
shareholders using their insurance companies as cash-cows to fund their non-insurance business ventures at the expense of creating the necessary insurance pools
Siphoning of premiums towards shareholder loans
Insurance and Pensions Commission

12. Regulatory Concerns Cont’d
Weak board oversight- quality of minutes do not reflect
Poor capital quality to support insurance business
In appropriate asset structure coupled with cases of misrepresentation of reported financial position
Some cases of high proportion of related part transaction
Premium debtor problem
Insurance and Pensions Commission

13. Environmental Factors
Stagnation/slow in insurance growth
Harmonisation of Regulation within the region will eventual open up the Zimbabwean insurance market under the SADC’s Financial and Investment Protocol
Technological driven insurance products and other disrupters e.g. banker insurance
Informalisation of the Zimbabwean Economy making traditional products less relevant – take the business where the business is
Insurance and Pensions Commission

14. Regulatory Development
Regulatory developments are prompted by the need to enhance policyholder protection under the changing environment
Strengthening supervision and regulation becomes imperative
Adapting risk based supervision (RBS)
Training and development of RBS in progress
Insurance and Pensions Commission

15. Regulatory Development Cont’d
Amendments of the insurance laws bill may be presented to parliament before year end
Revision of individual shareholding threshold
Barring shareholders with significant shareholding from holding executive positions in insurance companies
Insurance and Pensions Commission

16. Regulatory Development Cont’d
Deadline for compliance with investment guidelines and guidelines on the calculation of capital which among other things define (admissible and non- admissible assets) is fast approaching (31 December 2015 and 31 March 2016 for non-life and life companies respectively) (where are we?)
These guidelines are meant to positively impact on the quality of capital and ability of insurers to match assets and liabilities
Insurance and Pensions Commission

17. Regulatory Development Cont’d
Risk Management Survey for the insurance completed – laying the foundation Solvency II
Results enscouraging 62% of insurers have documented Risk Management Strategies in place
Risk management guidelines being developed
The Commission is also advocating for the early adoption of the new audit reporting requirements – auditors are now mandated to disclose Key Auditor Matters (KAM) – insurance industry should embrace for this sooner than later (2016)
Insurance and Pensions Commission

18. Regulatory Development Cont’d
TCF (ethical or regulatory issue)
TCF ≠ Customer satisfaction
A satisfied customer may have been treated unfairly
An unsatisfied customer may have been treated fairly (unrealistic expectations
Microinsurance Framework – Financial inclusion is now a national agenda
-Anti-money Laundering and Combating the Financing of Terrorism (AML/CFT) need for KYC
Insurance and Pensions Commission

19. Solvency II is it Part of the Agenda?
Moving towards some Solvency II Regime in the context of the Zimbabwe
Regulatory developments are towards Solvency II
Pillar 1 sets out quantitative requirements, including the rules to value assets and liabilities (in particular, technical provisions), to calculate capital requirements and to identify eligible own funds to cover those requirements;
Standard and Internal Models for capital determination
Insurance and Pensions Commission

20. Solvency II Cont’d
Pillar 2 sets out requirements for risk management, governance, self assessment
Pillar 3: transparency, reporting to supervisory authorities and disclosure to the public, thereby enhancing market discipline and increasing comparability, leading to more competition and better protection of policyholders.
Insurance and Pensions Commission

21. Regulatory Implications for the Industry
Both regulatory developments and environmental changes will continue to impact on the landscape of local insurance industry
Need for proactive players and track international regulatory developments as one day in one way or the other will become applicable
Self assessment of the impact of developments
Those who fail to adopt strategically to the changes will fall along the wayside
Insurance and Pensions Commission

22. Conclusion
Regulation will follow international standards and is shifting from being prescriptive to be principle based
However want to prescribe the following:
Risk Management and TCF are essential business practices to be embedded in the way of doing business and never to be taken as regulatory burdens
Insurance and Pensions Commission

23. Conclusion Cont’d
Insurance is not for those looking for money but those who have money and are seeking for a descent return on investment in the medium to long term
Lets be fair to the policyholders and make money in a responsible manner
Capital increments may not be avoidable in the near future
Insurance and Pensions Commission

24. END
THANK YOU QUESTIONS?
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