About 70% of ZSE stocks funded by insurance companies and pension funds: IPEC

About 70% of ZSE stocks funded by insurance companies and pension funds: IPEC

Insurance24 Reporter

HARARE, The Insurance and Pension Commission (IPEC) says almost 70% of Zimbabwe Stock Exchange (ZSE) stocks is funded by insurance companies and pension funds as institutional investors and these are probably the strongest local investors.

Commissioner of Insurance, Pension and Provident Funds Tendai Karonga at the 2017 Annual Shareholders and Inventors Forum in Zimbabwe said total insurance and pensions industry had total assets of $5.4 bln as at March 2017, the bulky of which is invested in capital markets.

“The Insurance and Pensions Industry is a key player in capital markets in Zimbabwe given that the industry is a vehicle used to mobilize long term savings which in turn are used to oil operations of the markets,” he said.

In addition, he added that the industry also plays a critical role in mobilizing resources through prescribed assets, which resources are used to deliver infrastructure, ensure food security among others.

The insurance industry comprises of 49 insurance companies among them 12 Life Assures, 9 Funeral Assures, 20 Non-Life insurers, 4 Non-Life Reinsurers, 4 Composite Reinsurers.

As at March 2017, the insurance sector had an asset base of $2.1 bln. On other hand the pensions industry has four broad categories which are Private Occupational Pension Schemes, Private Individual Pension Policies, NSSA and the Public-Sector Pension Scheme of which IPEC only regulates the Private Occupational Pension Schemes and the Private Individual Pension Policies.

As at March 2017 IPEC regulated pensions industry had about 1400 pension funds while the pension industry had a total asset base of $3.3 bln for during the same period.

According to Karonga, the critical issues affecting capital markets from view point of insurance companies and pension funds include corporate governance and disclosure issues. He said it is critical that all listed companies report pension contribution arrears so that fund members do not lose out.

He said the other issue is lack shareholder activism and in most cases led to corporate being involved in unethical as well as other activities prejudicing shareholders.

“This problem could be emanating from the fact that the investors we protect namely pension fund members, invest through their funds and hence do not have direct control of decisions but rather through trustees.

“It is against this background that we urge investors, especially pension funds to up their game in terms of shareholder activism so as to always keep companies that they would have invested in, under check,” he said.

Karonga on the tradability of fixed income securities, the market in particular pension funds are faced with situations where certain investments especially fixed income securities are not tradable and can only be held to maturity.

“This implies that before maturity of the fixed income securities, the pension funds are not able to liquidate the same fixed income securities to honor their obligation. Therefore it of critical that we find mechanisms or create a secondary market to enable tradability of fixed income securities,” he said.

Meanwhile, the Commissioner said reforms are currently underway to enhance the stability of the insurance and pension industry which will result in improved protection of policyholder and fund member interests.