Life assurers seek prescribed assets relief

ZIMBABWEAN life assurance firms are seeking a reprieve from government on prescribed assets, which they say are inhibiting their ability to invest in value preserving assets.
This comes as the local insurance and pension industry has been forced to watch their books’ value eroded by rising inflation, as regulators’ investment rules restrict their ability to save the situation.
The country’s inflation increased to a 10-year record of 176 percent in June 2019, from 2,91 percent in June last year.
And in 2008 and 2009, the industry suffered serious value erosion, along with the rest of the economy, during the country’s record-breaking episode of hyperinflation.
“We have made the argument to the Minister of Finance that our participation in prescribed assets should be determined by those assets’ ability to track inflation,” Rufai Mavukeni, Life Offices Association’s secretary-general said in Harare last week.

“Having learned our lesson in the period leading up to 2009, where we lost value mainly because of certain assets that we were invested in, our members are continuously seeking investment that preserves value.
“Remember we get policy contributions from members and it is our responsibility to protect these funds, and we can only do that if we are able to invest in assets that protect value,” Mavukeni said.
“So we have proposed to government that they give us prescribed assets that track inflation. If they do that, then our participation will be encouraged because our priority is protecting policyholder funds and we can only do that if we invest in assets that preserve value,” he added. According to the Pension and Provident Funds Act, an insurer “which carries on pension and provident fund business shall at all times hold not less than 35 per centum of its assets, which are assets in Zimbabwe and which have been designated as being assets of the pensions fund of that insurer” and in specified securities or loans.
The Insurance Act also provides that, “every insurer shall in respect of the insurance business carried on by them in Zimbabwe, hold the insurance fund in prescribed securities and in such proportions of prescribed securities as may be specified by the minister”.
And this, and other restrictive rules, players in the industry say, has chained then.
“One of the challenges for the local insurance and pensions sector is the issue of regulatory restrictions in investing. In an inflationary environment, funds that are not adjusted quickly will suffer through the loss of value,” Chakanyuka Nziradzemhuka, the chief strategic officer at the National Social Security Authority (NSSA) said re