Omega Ukama 
COMPENSATION to pension fund scheme members and insurance policyholders for losses suffered when the Zimdollar was demonetised in 2009 is set to begin next year after the government laid down the framework last week.
This comes as the insurance and pensions industry has been pushing for the finalisation of the matter amid concerns that the “delay” was hurting public confidence in the industry.
Eight years ago, a commission of inquiry into currency conversions that followed the abandoning of the domestic unit found that about US$3 billion was lost to inflation and the absence of a definitive valuation framework.
IPEC commissioner, Gace Muradzikwa
On the part of the pension funds and insurers, the regulations, which were published in the government gazette last Friday, primarily seek redress for valuation failures that may have occurred when the conversions were made in 2009.
“… full indemnification of the quantified loss of value of pension benefits… is not practicable given that the losses were for the greater part fortuitous, nevertheless, it is right, fair, proper and desirable for those affected by the loss to receive some compensation from relevant pension funds and insurers, and from the state,” read part of the regulations.
The framework pays particular attention to the separation of assets — which was among the major valuation failures identified by the 2015 inquiry — and resembles judicial administration procedures, essentially seeking a fair distribution of the salvaged loot.
Liable funds and insurers should submit compensation scheme proposals to the Insurance and Pensions Commission (Ipec) by the end of this year and begin disbursements as soon as their plans are approved.
Ipec will, on the basis of the plans it approves, devise a supplementary compensation plan, which will be appraised by the Finance minister and be “payable from the funds of the commission and from sums appropriated by parliament”.
To calculate the prejudice to its members, funds and insurers are expected to appoint an independent actuary.
Among other things, the regulations stipulate compound, discount and exchange rates to be used in the computations.
An interest of at least three percent per annum will be charged on all compensation until the day it is paid.
Zimbabwe Insurance and Pensions Apex Council chairperson, Sandra Musevenzo, said compliance with the regulations would pose a “significant challenge” for the industry.
“It will require a lot of resources, data and coordination among various stakeholders,” she told The Financial Gazette.
Musevenzo said the process would help restore confidence and trust in the insurance and pension industry, “as well as enhance the protection and security of policyholders and pension fund members”.
“The regulations are also expected to improve the governance, risk management and compliance standards in the industry, as well as align it with global best practices.”
She emphasised the need for the industry and government to follow through on the compensation plan.
“… the success of the compensation framework will depend on the political will, economic stability and social acceptance of the process.”
Meanwhile, the government has started compensating depositors who incurred losses due to a statutory exchange rate movement in 2019 when local balances and bond notes were denominated as ‘RTGS dollars’.
The government plans to compensate depositors to the tune of US$75 million.
For the insurance and pensions industry, Ipec issued valuation guidelines that seem to have cleared most of the inconsistencies that were created by the currency conversion in 2019.
newsdesk@fingaz.co.zw
