Lifeline for funeral assurance firms

Lifeline for funeral assurance firms
Published: 06 April 2018
The Insurance and Pension Commission has thrown a lifeline to funeral assurance firms failing to meet the $2,5 million minimum capital requirements by allowing struggling entities to comply with the regulatory capital threshold through a phased plan.

Industry sources said IPEC had agreed to extend the deadline for the funeral assurers to meet the gazetted minimum capital requirements. However, the regulator later changed its position and agreed to a structured compliance plan proposed struggling firms.

The original deadline was December 31, 2017.

However, there has always been an outcry from funeral assurance companies who contend that the deadline set for them was unachievable considering the economic environment and that the majority of their business was purely micro insurance in nature.

A well-placed source at the Zimbabwe Association of Funeral Assurers told The Herald Business that there had been engagements between the regulator and the players in the industry on how best to find common ground regarding the issue.

"We had a meeting between IPEC and funeral assures. There were deliberations around the issue of minimum capital requirements. Most funeral assures are failing to meet the new capital requirements of $2,5 million from the previous $1,5 million.

"IPEC understood and accepted the concerns of the companies which included the current economic environment that has rendered them illiquid to meet the new minimum capital requirements. The regulator, however, said it will stick with the gazetted timeline, but will provide room for struggling assurers to meet the requirement through a phased process plan," said the source.

Efforts to get a comment from IPEC Commissioner Tendai Karonga were fruitless as his mobile phone went unanswered this week.

The decision by Government, announced by Finance and Economic Planing Minister Minister Patrick Chinamasa in his 2017 National Budget, to increase minimum capital requirements was aimed at cushioning policyholders from risk posed by weak and insolvent insurers.

The funeral assurance industry's average prescribed asset ratio is slightly above one percent, below the required regulatory 7, 5 percent level.

As at March 31, 2017, three funeral assurers' capitalisation levels were below the minimum capital requirement of $1, 5 million.

IPEC is on record saying that funeral assures failing to meet minimum capital requirements should explore the possibility of merging.
- the herald
Tags: Lifeline,

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