HARARE – Players in Zimbabwe’s insurance and pensions industry should come up with products that can withstand the kind of economic cycles that the country has undergone in the past.
This was said by participants at this year’s Zimbabwe Finance Conference, which was hosted by Financial Markets Indaba in partnership with Business Weekly.
Said Old Mutual Assurance Life Company acting managing director Rutendo Magorimbo:
“Given what we know, there is need for (insurance) products that can withstand the cycles that Zimbabwe has gone through.”
The country has gone through hyperinflation cycles, most commonly around 2008 when annual inflation peaked at 89.7 sextillion percent in November 2008. Hyperinflation also reared its ugly head the next decade, peaking at 837.5 percent in July 2019.
Hyperinflation has a tendency to expose firms to varying rates of price and/or asset adjustments, which can lead to the understating or overstating of assets and income.
For entities such as insurance companies and pension funds that deal with the public’s monies for an extended period of time, the consequences can be devastating as what was experienced around between 2007 and 2009.
The economy has also had to deal with currency changes, both in 2009 and 2019.
In 2009, the country adopted a multicurrency system, which was largely underpinned by use of the United States dollar.
And as recently as 2019, the Zimbabwe dollar was re-introduced after a 10-year hiatus through Finance Act No.2 of 2019 and Statutory Instrument 212 of 2019, which provide for exclusive use of the Zimbabwean dollar to settle all domestic transactions, as well as penalties for failure to do so.
Adjustments have since been made to allow for US dollar transactions.
Insurance and Pensions Commission (IPEC) Commissioner Dr Grace Muradzikwa, told the same event that product relevancy will also help boost confidence in the sector.
“We need to focus on restoring confidence and this should be underpinned by the development of relevant products that meet customers’ needs.”
She added that it was vital that local insurance players and pension funds need to come up with competitive products if they are going to withstand heat from regional players.
Start of trading under the AfCFTA Agreement began on January 1, 2021.
“The issue of competitiveness is not optional. Zimbabwe is a party to the African Continental Free Trade Area (AFCFTA). As IPEC, we have been engaging players in the industry so that we properly define our core business.
“Once the borders are open, the only way we can survive is if we have the right products and business models.” – Business Weekly