Funeral Assurers struggle to comply with prescribed asset ratio
Funeral Assurers compliance with prescribed assets declined by 50% in the half year ended June 30 2020 to 0, 02% from 0, 04% comparable period last year.
The funeral assurers are expected to comply with the minimum prescribed asset ratio of 10.00% as stipulated by Statutory Instrument 206 of 2019.
Insurance and Pensions Commission in its H1 report noted that prescribed asset investments continued to be relatively insignificant as they accounted for only 0.03% of the total asset portfolio.
“The Commission directed all funeral assurers to submit compliance roadmaps whose implementation the Commission is monitoring.
In nominal terms, investments in prescribed assets decreased by 26.04% from ZWL$204,490 as at 31 March 2020 to ZWL$150, 940 as at 30 June 2020.
The Commission will continuously lobby the Government of Zimbabwe for the development and introduction of index linked prescribed asset instruments for the preservation of investor and policyholder funds.
In the interim, funeral assurers are expected to comply with prescribed assets investments, especially where benefits are of a fixed term nature,” said IPEC.
Ipec added that prescribed assets also assist in managing the liquidity position of Funeral assurers, given that most of the investments are of a short-term nature.
However funeral assurers’ total assets increased by 26,42% in absolute terms to ZWL$711.59 million from ZWL$562,87 million as at 31 March 2020 but in nominal terms, investments in prescribed assets decreased by 26,04% from ZWL$204, 490 as at 31 March 2020 to ZWL$151, 240.
Total technical liabilities for the funeral assurance sector significantly increased by 689.91% from ZWL$28.57 million as at 31 March 2020 to ZWL$225.676 million as at 30 June 2020.
The significant increase in technical liabilities was attributed to the adoption of actuarial recommendations by funeral assurers.
“The adoption of the actuarial recommendations was in response to the Commission`s recommendations for funeral assurers to engage their actuaries in quantifying their actuarial liabilities to reflect their risk exposure,” Ipec said.
The number of policies written by the dedicated funeral assurers decreased by 41.44% from 236,648 policies for the six months ended 30 June 2019 to 138,580 polices for the six months ended 30 June 2020.
This was driven by dwindling disposable incomes because of the prevailing harsh economic environment, which resulted in the number of lapsed funeral policies increasing during the period under review.