Sub-inflation money market hits insurers’ liquidity

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ZIMBABWEAN short-term insurers’ aversion to money markets due to sub-inflationary returns is putting a strain on the sector’s liquidity, latest industry reports show.
In its report for the half-year ended June 2022, industry regulator Insurance and Pensions Commission (IPEC) said while liquid assets in the form of cash and cash equivalents, money market instruments and short-term prescribed assets increased by 263 percent to $7,66 billion during the period under review, liquidity was “low” as measured by an average acid test ratio of 25 percent.

“Eight out of the 19 operational short-term insurers had negative working capital ratios … the low ratio is a cause for concern as short-term insurers face a high liquidity risk, leading to low capacity to meet short-term financial obligations.”