Omega Ukama 
THE Insurance and Pensions Commission (IPEC) says Zimbabwean life assurers’ uptake of reinsurance, at about two percent, is very low and could lead to insolvency.
Players are encouraged to reinsurer so as to spread portions of their risk portfolios to other parties to reduce the likelihood of paying a large obligation resulting from an insurance claim.
According to IPEC’s Life Assurance Industry Report for the three months to June 2019, the subsector has premiums worth $5,17 million ceded to reassurers, out of a total of $252,18 million written by the industry for the half-year to June 2019. This translates to a reinsurance ratio of 2,05 percent and a retention of 97,95 percent.
“The commission continues to urge industry players to be prudent and set retention levels that are in line with the strength of their balance sheets so as to minimise the risk of insolvency in times of stress,” IPEC said.
“In the same vain players should put in place robust risk management systems that enable them to effectively manage their risks and ensure safety of policyholders’ funds,” the regulator added.
This comes as IPEC has for years, called on the insurance industry to increase its uptake of reinsurance.
This is also not the first time the regulator has expressed concern over low reinsurance uptake in the life assurance industry.
“Industry players should periodically assess their capacity to retain risk and review their reassurance arrangements accordingly so that they are not exposed in times of bad claims experience…life assurers may not have yet accumulated adequate critical mass to enable diversification of underwriting risk,” IPEC said in its 2018 Third Quarter Life Assurance Industry Report, when the subsector’s reinsurance ratio was about 1,5 percent.
However, Zimbabwe’s foreign currency shortages are inhibiting reinsurance firms from underwriting more business.
Reinsurers say they can only write so much business before they have to cede to other reinsurers beyond the borders and the foreign currency challenges limit them in this regard.
“There are risks which need to be insured, but local companies may not be able to pay for the loss from their balance sheet, so the industry cannot do without these reinsurance arrangements and it needs foreign currency,” Josphat Kakwere, the head of pensions at IPEC said recently at a workshop organised by IPEC, NSSA and ZimSelector.com.
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