Preliminary Impact on the Insurance and Pensions Industry
- Vice President, whilst it may be too early to assess the full impact of COVID 19 on the insurance and pensions industry, preliminary indications have pointed to the following:-
- Huge reduction in investment income from real estate – as you may be aware, the insurance and pensions industry controls about 80% of commercial real estate in most urban and peri-urban centres. To date, 70% of the industry’s assets are invested in real estate. Given the closure of businesses during the lockdown and its impact on business, the industry is anticipating a serious reduction in investment income as tenants fail to pay rentals on account of business closure. We have already had submissions from some of the pensions fund citing the impact on rentals and calling for pensioners to be treated as a vulnerable group eligible for support;
- The pandemic has also affected the labour market, which has a bearing on pension contributions in the short-to-medium term. As such, inflows to pension funds in the form of pension contributions will be adversely affected by the pandemic;
- Slowdown in infrastructure development and other projects of national importance due to reduced incomes as the industry is a key strategic investor in such projects;
- Pensioners are directly and indirectly affected as the pandemic is negatively affecting investment return. The situation has been exacerbated by inflation developments, as the year-on-year inflation for March 2020 stood at 676%.
- Some reduced revenues as policyholders reduce covers as a response to the reduced economic activity during the lockdown period; and
- At the same time the sector is still weighing the possibility of claims from policyholders with business interruption policies.
- Having said this, Hon VP , the pandemic has exposed gaps in cover as the indications are that most business operators did not have cover for business interruption covering pandemics. This will be a learning point for the industry, and business operators and I am sure that based on this experience, there will be efforts to make such cover available in the future.
Measures by IPEC
- The Commission worked with the industry players to put in place measures to support Government in the fight against the spread of Covd-19 pandemic. The industry rose to the challenge like true warriors. The Deputy Chair of the Industry APEX Mr Musa Bako will speak to this and update the meeting on all the initiatives by the Insurance and Pension Industry.
- Given the need to observe social distancing, IPEC also engaged the funeral assurance sector to pay funeral policy beneficiaries ex-gratia payments in the wake of the withdrawal of funeral bus services for mourners. In the same vein, funeral assurers have been engaged to provide bus services during memorial services for willing beneficiaries.
- Consideration be made to designate the insurance and pensions industry as an essential service provider to facilitate staff movement to offices on a need basis to ensure that claims and pension benefits continue to be paid even during the ongoing COVID 19 situation.
- Pensioners be considered as vulnerable groups under the Social Protection & Cash Transfers facility. The measure will help to augment pensioners’ income and prepare them to respond better to the impact of COVID 19 and inflation. The disbursement of allowances to pensioners can be easily coordinated through their respective pension funds.
- Meantime , we are committed to continuing to support the government initiatives and to harness available resources as needed.
Commissioner of Insurance Pensions and Provident Funds