Zimbabwe’s insurance industry to suffer low product demand
ZIMBABWE’s insurance industry is expected to endure low demand for a broad range of insurance lines owing to a tough economic environment, a research report has revealed.
BMI Research, which is part of Fitch Solutions, in a report, Zimbabwe Insurance Report, (summary) said similar to other sectors of the country’s economy, Zimbabwe’s insurance industry is facing enormously challenging operating conditions.
“The country has fallen into a recession and further decline is expected in the short term and high levels of inflation, continued political instability and ongoing liquidity shortages will dampen economic growth and in turn limit individual and corporate demand for a broad range of insurance lines.
“As such the insurance market will remain heavily dependent upon basic, affordable insurance products with little demand for more sophisticated covers,” reap part of the summary report.
The economic meltdown has severely dented the insurance sector with the country’s insurance penetration ratio declining from around 6% to below 2% over the last decade. The industry remains under significant pressure, with many companies seen to be financially unsound.
In the 2020 national budget, Finance minister Mthuli Ncube reviewed upwards the minimum capital requirements for insurance entities to $75 million to ensure that they are well-capitalised to protect value for policyholders and pension members.
The minimum capital requirements for short-term and funeral insurance entities was reviewed to $37,5m from $2,5m, life assurance and re-insurance to $75m from $5m and micro-insurance to $4,5m from $0,3m with immediate effect.
“The obtaining macro-economic environment has necessitated upward review of minimum capital requirements for different players in the insurance industry to ensure that entities are well-capitalised for the protection of value for policyholders and pension members,” Ncube said.