Prescribed asset ratio deficit worries regulator, as IPEC seeks compliance
Insurance24 Reporter
Bulawayo, The insurance and pensions industry regulator, IPEC has challenged the Funeral Assurance Industry to develop a plan on how the industry intends to deal with the deficit on the prescribed asset ratio which is slightly above 1 percent way below the required 7.5 percent.
According to Commissioner Tendai Karonga’s presentation at the Zimbabwe Association of Funeral Assurers conference said the Commission continues to take great exception due to the depressed economic environment, but players should find a way to comply.
“IPEC takes great exception to this and continues to urge funeral assurance industry players to comply with the 7, 5 percent prescribed asset ratio. IPEC expects ZAFA members to present a plan on how the industry intends to deal with this deficit,” he said.
As at 31 March 2017, the prescribed assets investment from the funeral assurers was only around $480 000 and some of the companies have not contributed anything at all.
Karonga said the current minimum capital requirement for funeral assurers in terms of Statutory Instrument 21 of 2013 is $1, 5 million while the revised minimum capital requirement for funeral assurers will be S$2, 5 million once the new Statutory Instrument is published.
There are 9 funeral assurers and 11 life offices authorized to conduct funeral assurance business. According to the Commissioner, the Funeral Assurance industry continues to grow despite the general economic challenges facing the country.
During the first quarter 2017, 3 funeral assurers’ capitalization levels were below the minimum capital requirement of $1, 5 million.
The Commissioner said Funeral assurers who are failing to meet the minimum capital requirements should explore the possibility of merging so that they become stronger.
“Funeral assurance industry players are also advised to have sufficient liquidity to cover their liabilities as recommended by their actuaries,” he said.
Karonga said owing to challenges experienced in respect of paid up policies, Insurers have shunned away from term assurance policies opting for whole life assurance policies and this has led to complaints by some who feel aggrieved.
“Against this background, the Commission urges funeral assurance companies to come up with products which are flexible to suit the needs and circumstances of policyholders,” he said.
Karonga also said current economic challenges have led to an increase in lapse ratios as well as non taken up policies as policyholders fail to raise money to pay premium due to economic hardships.
