MEMORANDUM TO CABINET COMMITTEE ON LEGISLATION

PRINCIPLES FOR THE PROPOSED AMENDMENTS TO THE

INSURANCE AND PENSION LEGISLATION
Introduction
1. This Memorandum outlines principles that will underpin review of
legislation for the insurance and occupational pension schemes,
notably, the Insurance Act [Chapter !"#$%, the &ension ' &rovident
(unds Act [Chapter !"#)% and the Insurance ' &ensions
Commission Act [Chapter !"1%. The principles are also proposing
a few amendments to the *ational +ocial +ecurity Authority
[Chapter 1$"#!% and the Medical +ervices Act [Chapter 1,"1-%.
. The proposed review of the insurance ' pension legislation has
been necessitated by the need to address identified deficiencies in
the current legislation, as well as the need to align .imbabwe/s
legislation with international best practices.
-. Most of the deficiencies were identified through the #1
assessment done by e0perts from the +A1C +ecretariat on the
level of compliance of the country/s legislation to the industry
standards set by the International Association of Insurance
+upervisors 2IAI+3 and the International 4rganisation of &ension
(unds 2I4&+3. Therefore, bench mar5ing .imbabwe/s legislation to
thecore principles of insurance and pension funds regulation set by
these international standard setting bodies/forms the basis of the
proposed amendments.
!. Incorporating these international standards in the country/s
insurance and pension legislation will ensure a sound regulatory
and supervisory framewor5. The ade6uacy of the regulatory
framewor5 is a re6uisite for maintaining fair, safe and stable
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insurance and pension sectors for the benefit and protection of the
interests of policyholders, as well as contributing to the stability of
the financial system. As such, the proposed review is being
pursued in the spirit of continuously updating the insurance and
pension legislation in line with dynamic global and regional financial
trends.
Justification for t! Pro"os!d A#!nd#!nts
,. The dynamic nature of the financial sector compels regulators of
the financial sector to 5eep pace with developments in the global
financial mar5ets arising mainly from technological innovation and
the development of new financial instruments by financial
institutions. (inancial sector regulators should therefore, constantly
monitor developments in the sector and align their legislation to
mar5et developments.
7. Through the proposed amendments, 8overnment strives to create
a robust andinternationally respected insurance and pension
industry that is a vehicle for ris5 transfer for the commercial,
industrial and personal insurance covers, playing its national role of
financial security to the public and financial support to the fiscus.
$. The legislative review will focus on such issues li5e, corporate
governance, legal ' regulatory framewor5 and prudential
standards. +pecific areas that the review will focus on include9
empowering the Insurance ' &ensions Commission to effectively
supervise the sector, addressing corporate governance issues, anti:
money laundering and countering the financing of terrorism, group
wide supervision of financial conglomerates, regulation of medical
aid schemes and cooperation among financial sector regulators.
;. +pecific areas for the pension sector include enhancing protection
of policy holders, rights of policy holders, allowing offshore
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investments by pension funds and insurance companies, regulation
of insurance and pension aspects of the *ational +ocial +ecurity
Authority 2*++A3, valuation of pension assets, and I&<C/s
improved oversight on pension funds, among others.
). +ince the establishment of the Insurance ' &ensions Commission
2I&<C3 in ##7, operational Acts, namely the Insurance Act
[Chapter !"#$% and the &ension and &rovident (unds Act [Chapter
!"#)% remained largely unchanged and hence there is now a need,
not only to synchronise the three acts, but to also revamp them
such that they conform to international standards and best
practices governing regulation and supervision of the insurance and
pension sector.
1#. It is therefore, my proposal to amend the three Acts covering
regulation of the insurance and pensionactivities in .imbabwe.
Although individual =ills will separately be submitted for
&arliamentary approval, the ob>ective of this Memorandum is to
have the principles approved >ointly.
11. I will cover the proposed amendments under four categories as
follows":
i. Amendments aimed at enhancing I&<C/s supervisory
capacity9
ii. Addressing deficiencies under the Insurance Act9
iii. &ension ' &rovident (unds Act deficiencies9 and
iv. Cross cutting issues for both the Insurance and &ension
industry.Amendment of the I&<C Act
1. There is general consensus among all 5ey sta5eholders for the
insurance and pension industry on the need to strengthen the
Insurance ' &ensions Commission/s 2I&<C3 supervisory capacity.
In this regard, I propose the following amendments in pursuit of
enhancing the regulator/s capacity":
&owers of the Commission versus the Commissioner,
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<liminating all forms of significant conflict of interest on the
I&<C =oard including that arising from appointment of mar5et
players on I&<C/s =oard,
<nhancing I&<C/s corporate governance,
&ower to do fit and proper test assessments on an ongoing
basis on shareholders, directors as well as 5ey personnel
&ower to appoint curators and li6uidators to ailing institutions,
&ower to accredit actuaries, auditors, asset managers, credit
rating agencies and any other 5ey service providers to the
insurance and pension industry,
&ower to ta5e timely corrective supervisory action on
regulated entities including interventions, enforcement and
sanctions against regulated entities, shareholders, board
members, or employees. This should include criminal and civil
liability of any shareholder, director?trustee or employee of a
regulated entity who will have been found to have acted
negligently or fraudulently resulting in policyholders and fund
members suffering financial pre>udice.
&ower to ta5e corrective supervisory action on any entity
dealing with insurance or pension matters that may not
necessarily be a regulated entity such as holding companies
and auditors.
approval of shareholding limits for insurance companies9 and
<nhancing I&<C/s human and financial resources.
Po$!rs of t! Co##ission %!rsus t! Co##ission!r
1-. @hen the Insurance and &ensions Commission was set up in
##7 through the I&<C Act of ###, the Insurance Act and the
&ension and &rovident (unds Act should have been reconciled with
the I&<C Act. &rior to I&<C/s establishment, the two acts were
administered by the Commissioner/s department in the Ministry of
(inance. As such, regulatory powers that were vested in the
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Commissionerin terms of the e0isting Acts prior to the formation of
the I&<C should have been transferred to the Commission so that
the Commissioner would carry out the administrative functions of
the Commission.
1!. Anfortunately, this was not the case, hence there is need to
transfer regulatory powers currently bestowed upon the
Commissioner to the Insurance and &ensions Commission. +uch
powers include powers of registration, dissolution of pension funds,
and instituting investigations and inspections.
1,. (or e0ample, the +ecurities Act refers to the +ecurities and
<0change Commission as opposed to the Chief <0ecutive 4fficer.
Bi5ewise, the Ceserve =an5 of .imbabwe Act also refers to the
Ceserve =an5 of .imbabwe and not the 8overnor.
17. Therefore, the proposed amendments to both the Insurance and
the &ension and &rovident (unds Acts are meant to alter the
reference to the Commissioner to reference to the Commission.
This is in cognisance of the fact that the establishment of I&<C
entailed the appointment of a =oard to oversee wor5 of the
Commission.
Poor Cor"orat! Go%!rnanc!
1$. All the three Acts namely the I&<C Act, the Insurance Act and
the &ension and &rovident (unds Act, have glaring omissions in
respect of the area of corporate governance, which should be
addressed in line with internationally accepted codes of corporate
governance such as the Ding III Ceport on Corporate 8overnance.
@hilst ma>or progress has been made in addressing these
5
challenges in the ban5ing sector, similar changes need to be
effected in the insurance and pension industry.
1;. The re6uirement of Insurance Core &rinciple 2IC&3 $ is that I&<C
should re6uire insurers to establish and implement a sound
corporate governance framewor5. Contrary to this re6uirement for
such best practice, the Insurance Act does not have ade6uate
re6uirements for the insurer and bro5er to practice good corporate
governance. Although some insurance companies practice good
corporate governance, there is no re6uirement or supervisory
practices providing the basis for an assessment on the ade6uacy of
corporate governance structures.
1). There is, therefore, need to review the Insurance Act and the
&ension and &rovident (unds Act to empower I&<C to have
oversight over corporate governance in entities under the
regulator/s purview.
IPEC Board
#. The then I&<C =oard, whose term of office e0pired in 1ecember
#1-, was not operationally independent due to conflicts of interest
in board appointments as some of the =oard members were also
mar5et players.
1. 4ne =oard member was the Chief <0ecutive 4fficer of a local
ban5 which also had an insurance subsidiary. In addition, another
=oard member was the Chief <0ecutive 4fficer of a &ension (und
Manager, thereby e0posing such members to conflict of interests.
. In terms of the re6uirements of the Insurance Core &rinciple
2IC&3 , the regulator should be operationally independent,
accountable and transparent, protect confidential information, and
meet high professional standards in the e0ercise of its functions
and powers.
6
-. In this regard, there is need to amend the I&<C Act to ma5e it
e0plicit that,apart from the &ermanent +ecretary of the Ministry of
(inance ' <conomic 1evelopment and the Commissioner, all the
other board members must be independent. Individuals with
significant conflict of interest should not be appointed as board
members. +uch conflict of interest may arise from having interests
or being a member of a holding company with a subsidiary in
insurance and pension industry.
!. According to section , of the I&<C Act, =oard members of I&<C
were $ comprising the +ecretary to the Treasury and the
Commissioner as e0:officio members and five other members
appointed by the Minister considering the 5nowledge and
e0perience about insurance and pension matters. .
,. Through the proposed amendments, the I&<C =oard members
will be increased from the previous numberof $ to ) members,
including the Commissioner and the &ermanent +ecretary of the
Ministry of (inance and <conomic 1evelopment. (urther, their
6ualifications will be stipulated to ensure full constitution of a =oard
with diverse s5ills. The board should have a balance of s5ills mi0
which should at a minimum include insurance and pension industry
e0pertise, actuarial, legal, finance, regulatory bac5ground, human
resources management and any other e0pertise as may be
re6uired.
Board Co##itt!!s and Ot!r &!' A""oint#!nts
7. Currently, I&<C does not have the necessary oversight =oard
Committees e0cept for the (inance and Cemuneration Committees
2Euman Cesources3 which are administratively focused. It is critical
that the regulator has ade6uate resources, human or financial,
sufficient to enable it to conduct effective supervision. There is
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therefore need for a statutory re6uirement to put in place =oard
Committees which should at a minimum include the Technical
Committee such as Audit, BegalIT 8overnance andBicencing
Committees among others.
Mana(!#!nt S)i**s
$. I&<C has since its establishment in ##7 operated without a
legal counsel, IT department, and actuary among other 5ey
functionary areas. It is also critical for I&<C to have staff members
with a balanced s5ills mi0 which must include actuarial e0pertise,
insurance and pensions e0pertise, legal e0pertise,
accounting?auditing e0pertise, finance?economics, human
resources e0pertise, and money laundering compliance officer 2new
re6uirement of the Money laundering and &roceeds of Crime Act of
#1-3, among others to enable smooth running of the Commission.
Po$!r to do a Fit andPro"!r t!st
;. In terms the Insurance Act 2section -3, suitability re6uirements
focus on directors and management only upon registration.
Currently, there is no re6uirement for insurers and bro5ers to review
and report on suitability after registration.
). +imilarly, the &ensions ' &rovident (unds Act does not have
e0plicit provisions empowering I&<C to do a fit and proper test of
senior appointments in &ension (unds.A case in point is the Mining
Industry &ension (und&ension (und 2MI&(3 which challenged in
courtI&<C/s decision to fire MI&(/s chairman for abuse of office and
negligence. Eowever, I&<C/s decision was challenged in that the
regulator did not have e0plicitly powers in the law empowering them
to do a fit and probity test. Anli5e the =an5ing Act which empowers
the Ceserve =an5 of .imbabwe to do a fit and probity test of senior
appointments in ban5ing institutions, the I&<C regulated institutions
were silent on this aspect.
8
-#. In addition, the re6uirement for fit and probity test is not currently
applicable to shareholders, actuaries, auditors, asset managers,
rating agencies and other 5ey service providers. (urther, there is no
re6uirement obliging the insurer to regularly review and inform the
supervisor of changes in the above appointments. Thus, detailed
vetting of the actuaries and auditors is re6uired to chec5 whether
they are e0perienced enough for the comple0ity of the insurer/s
ris5s and business.
-1. The above proposals to empower I&<C to do a fit and probity
test are in line with the re6uirementsof IAI+ and I4&+ standards.
In this regard, the following institutions will be sub>ected to integrity
and competence tests board members, senior management,
actuaries, trustees, fund administrators, auditors and significant
shareholders of an insurer, bro5ing firm and pension funds to be
and remain suitable to fulfil their respective roles
-. To this end, it is proposed that the Insurance Act and the &ension
and &rovident (unds Act be amended to obligeregulated entities to
see5 I&<C/s approval before appointment of board members, head
of 5ey functions, auditors, actuaries, asset managers, rating
agencies and any other 5ey service providers. I&<C should also
have the power to dis6ualify the above mentioned personnel should
the need arise. (it and probity should also be applied on an
ongoing basis. The regulated entities should also immediately notify
I&<C if a board member or any other manager, 5ey person, auditor
or actuary resigns. The practice currently is that I&<C would only
5now of changes when such institutions file annual returns. In
addition, investigation into financial soundness of significant
shareholders is re6uired in the Insurance Act.
9
--. It is proposed that the Insurance Act and the &ension and
&rovident (unds Act be amended to re6uire insurance companies
and pension funds to haveor enlist the services of auditors and
actuaries unless an e0emption has been granted in writing by the
Commission. Fualifications and e0perience of auditors, actuaries
and any other 5ey service providers should be thoroughly
investigated according to best practices to see whether they are fit
and proper for the nature and scale of the business of the insurer.
Sar!o*din( R!strictions
-!. The Insurance Act does not empower I&<C restrict ac6uisition of
significant interest in an insurance company, mergers, and or
portfolio transfers.
-,. This is in contrast to the re6uirements of insurance core principle
2IC&3;, which states that supervisory approval is re6uired for
proposals to ac6uire significant ownership or an interest that results
in that person 2legal or natural3, directly or indirectly, alone or with
an associate, e0ercising control over the insurer.
-7. According to IC& ;, the term GcontrolH over an insurer should be
defined in legislation and should address, at a minimum"
holding of a defined number or percentage of issued shares or
financial instruments 2such as compulsory convertible
debentures3 above a designated threshold in an insurer or its
intermediate or ultimate beneficial owner9 and
voting rights attached to the aforementioned shares or financial
instruments.
-$. Additionally, IC&; also applies to portfolio transfers or mergers of
insurers, where the regulator should approve such mergers,
ac6uisitions or portfolio transfers.
-;. In this regard, it is proposed that I&<C be granted powers to
approve mergers and ac6uisition of insurance companies.The
thresholds for significant interest may be set through subsidiary
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legislation 2Cegulations3. @here there is a shareholder who wants
to ac6uire significant shareholding which is above the prescribed
thresholds, such a transaction can only be granted on e0ceptional
basis and in consultation with the Minister.
Conso*idat!d Su"!r%ision
-). In the recent past, there has been blaring distinction between
ban5ing and non:ban5ing institutions owing to the growth of holding
companies 2commonly 5nown as financial conglomerates3. These
conglomerates are into various lines of business that include
commercial ban5ing, mortgage lending, insurance, securities,
microfinance, financial advisory, asset management, and property
development among others.
!#. The Insurance Act does not provide for consolidated supervision
ofthese conglomerates. In the absence of consolidated supervision,
it is becoming increasingly difficult for financial sector regulators to
coordinate their activities in supervising conglomerate organisations
to curb regulatory arbitrage. This has been e0acerbated by the silo
regulatory model for the .imbabwean financial sector, where there
are three regulators for ban5ing 2Ceserve ban53, insurance and
pensions 2I&<C3 and securities 2+ecurities Commission3.
!1. Against this bac5ground, it is a re6uirement of IAI+ standards
that I&<C should supervise insurers as a legal entity and in a
group:wide basis. In deciding which entities are relevant for a group
wide insurance supervisor, consideration should be given to, at
least"
operating and non:operating holding companies 2including
intermediate holding companies39
insurers 2including sister or subsidiary insurers39
other regulated entities such as ban5s and?or securities
companies9
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non:regulated entities 2including parent companies, their
subsidiary companies and companies substantially controlled or
managed by entities within the group39 and
special purpose entities.
!. In line with the ongoing review to the =an5ing Act, the I&<C
administered acts will be amended to empower I&<C to cooperate
with other regulators in conducting group wide supervision of
financial conglomerates.
!-. 8iven .imbabwe/s e0perience on problem ban5s such as
Cenaissance Merchant =an5 2CM=3 where problems in a ban5ing
institution that falls under a financial conglomerate affects other
non:ban5 subsidiaries of the group, it became apparent that there is
need for coordination and collaboration among financial sector
regulators.
!!. In view of this, I&<C legislation should empower it to obtain and
e0change supervisory information in respect of legal entities and
holding companies, including the relevant non:regulated entities of
such holdings.
!,. (urther, the proposed amendments to the I&<C Act will compel
I&<C to inform any other supervisor in the country in advance of
any action that might reasonably be considered to affect holding
companies in other lines of business supervised by other
supervisors.
Confid!ntia*it' of Infor#ation
!7. The +A1C Assessment Ceport identified that the current I&<C
Act does not address the protection of confidentiality of information
and employees where actions by staff were e0ercised in good faith.
In addition, the I&<C Act does not have penalties for those not
acting in good faith, as well as provisions in respect of persons
12
leaving employment. Although employment contracts may be
assumed to deal with this issue, there is need to be more e0plicit in
legislation as it is an important issue.
!$. Eowever, it is a re6uirement of the Insurance Core &rinciples
that I&<C staff and any individual acting on the regulator/s behalf
2presently or in the past3, be re6uired by legislation to protect the
confidentiality of information in the possession of I&<C, including
confidential information received from other supervisors. Thus,
I&<C should maintain appropriate safeguards for the protection of
confidential information. @rongful disclosure of confidential
information should be sub>ect to penalties.
R!(u*ation of M!dica* Aid Sc!#!s
!;. Currently, medical aid schemes are registered by the Ministry of
Eealth and Child Care in terms of the Medical +ervices Act
[Chapter 1,"1-%. Eowever, the institutions are not prudentially
supervised as there is no full time supervisor with dedicated
financial and technical resources them on an on:sitebasis. In
addition, a study done by +A1C under the auspices of the
Committee of Insurance, +ecurities and *on:=an5ing (inancial
Authorities 2CI+*A3 revealed that +A1C Medical Aid +chemes
including those of .imbabwe are facing the following challenges
mainly owing to under:regulation":
I <scalation of costs of medical supplies9
I Irregular actions will go unnoticed for the regulated entities9
I Anfair treatment of beneficiaries9
I challenges with governance of funds due to 5nowledge gap
between the trustees in particular employee representatives9
I Bac5 of industry 5nowledge by the consumers9
I *on regulation of service providers9 and
I 4utdated laws, among others.
13
!). In light of the above challenges facing the medical aid schemes
in the region, +A1C Ministers responsible for (inance and
Investment made a decision at their meeting of -# July ##) that
these institutions should rigorously be supervised under the
purview of insurance and pension regulators. The decision was
adopted by +A1C as the activities of medical aid societies or
schemes constitute insurance business. This +A1C position is
being pursued in the spirit of harmonisation of the regulatory
framewor5 for non:ban5ing financial institutions in fulfillment of the
+A1C (inance and Investment &rotocol 2(I&3.
,#. To this end, it is proposed that medical aid schemes which are
currently registered by the Ministry of Eealth' Child Care be
supervised by the I&<C to ensure harmonised regulation of
insurance business under one 8overnment agency. More so given
that medical aid societies/ business is a class of insurance which
should be regulated in the same vein with other insurance activities
in the country.
,1. The proposed regulation under I&<C is meant to address some
of the identified challenges through ade6uate regulation. The +outh
African e0perience is that in 1)); they made it mandatory for
medical aid schemes to meet the full costs of all medication and
treatment relating to each of the identified , listed chronic
illnesses. +uch illnesses which include asthma, diabetes, epilepsy,
hypertension, multiple sclerosis and various cardiac conditions for
which, along with the other listed conditions, various defined
treatments and medication are to be included as &rescribed
Minimum =enefits 2&M=3. Thus, through such regulation, I&<C will
be empowered to dedicate human and financial resources towards
14
ensuring that the public is protected against ma: practice by these
institutions.
Pro"os!d R!(u*ation of NSSA
,. *++A operates a national pension scheme which is not
regulated at the moment, though the institution gets policy direction
from the Ministry of Babour. There is a possibility that the
unregulated social security schemes could create regulatory
arbitrage which could be damaging to the pensions industry.
,-. It is proposed that the *ational +ocial +ecurity Authority be
brought under the purview of I&<C in order to enhance *++A/s
accountability,transparency and consolidate pension fund regulation
under one regulatory agency. To this end, the proposed
amendments also see5 to amend the *++A Act [Chapter 1$"#!% in
order to bring the national scheme under the purview of I&<C.
,!.
,,. The above proposal is in line with reforms ta5ing place in
countries li5e 8hana and Denya where one regulatory agency is
vested with powers to regulate both public and private pension
schemes in their countries.
IPEC+s Po$!rs to A""oint a Curator
,7. I&<C should have effective means of addressing management
and governance problems, including the power to re6uire the
insurer to replace or restrict the power of board members, senior
management, 5ey persons in control functions, significant owners
and e0ternal auditors. In addition, where necessary and in e0treme
cases, I&<C should have power to impose curatorship over an
insurer that is failing to meet prudential or other re6uirements.
,$. @hilst ailing institutions may need assistance from an e0pert to
recover, the Insurance Act and the &ension and &rovident (unds
15
Act do not have provisions for corrective action in the form of
curatorship by I&<C.
,;. In terms of the proposed amendments, I&<C will have the power
to place the registered person under curatorship as well as theright
to apply to the Eigh Court for the winding up of a registered entity.
I&<C will also have the right to oppose any such application made
by other persons.
,). Additionally, I&<C will be empowered to appoint a curator, or
apply to the high for the appointment of a li6uidator of the
registered entity or person. The claims of policyholders and I&<C in
relation to any fees or e0penses incurred in the e0ercise of its
duties in terms of the Act shall be against the person whose estate
is being se6uestrated or wound up and shall en>oy such priority as
may be prescribed.
Accr!ditation of Actuari!s, Auditors, Ass!t Mana(!rs, Cr!dit
Ratin( A(!nci!s and an' ot!r )!' s!r%ic! "ro%id!rs
7#. Actuaries, Auditors, AssetManagers, Credit Cating Agencies and
other 5ey service providers play a very critical role in the insurance
and pension industry yet there are no regulations to ensure that
I&<C is satisfied with their competency and integrity.
71. In this regard, it is proposed that the I&<C Act be amended to
empower I&<C to formulate the necessary instruments to ensure
that Actuaries, Auditors, Asset Managers, Credit Cating Agencies
and other 5ey service providers in the insurance and pensions
industry in .imbabwe are reputable and are beyond reproach.
AMENDMENTS TO THE INSURANCE ACT
7. (urther to the amendments that will be effected through
enhancing I&<C/s supervisory powers, it is proposed that the
16
Insurance Act be amended to ensure that I&<C re6uires the
insurer/s individual members of the =oard to"
act in good faith, honestly and reasonably9
e0ercise due care and diligence9
act in the best interests of the insurer and policyholders, putting
those interests of the insurer and policyholders ahead of his?her
own interests9
to ensure the promotion of appropriate, timely and effective
communications with the I&<C and relevant sta5eholders on the
governance of the insurer9
promotes a culture of sound ris5 management, compliance and
fair treatment of customers9
e0ercise independent >udgment and ob>ectivity in his?her decision
ma5ing, ta5ing due account of the interests of the insurer and
policyholders9 and
not use his?her position to gain undue personal advantage or
cause any detriment to the insurer.
Po*ic' Ho*d!r Prot!ction Fund
7-. In recent times, I&<C has witnessed an increase in the number
of institutions failing to meet their obligations?claims. To address this
challenge, it is proposed that the Insurance Act be amended to
provide for the setting up of a &olicy Eolder &rotection (und funded
from security deposits that will be administered by an Independent
=oard of Trustees. The (und will be the e6uivalent of the 1eposit
protection corporation for ban5s and the Investor protection levy for
the securities industry.
7!. Insurers will be re6uired to contribute to the (und. All income
accruing from the invested funds, less any reasonable e0penses
incurred by the =oard of Trustees will be payable to the concerned
insurer.The &olicy Eolder &rotection (und shall be run under the
purview of I&<C.
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A""oint#!nt of Ins"!ctors
7,. The current Insurance Act provides for the appointment of only
individuals as inspectors. This limits the scope of wor5 of such
bodies as auditors, and actuaries who may not be engaged as
inspectors. The proposed amendments are therefore meant to
e0tend the appointment of inspectors to include corporates or
associations.
Pro%ision R!*atin( to Association of Und!r$rit!rs
77. Currently the Insurance Act does not provide for the registration
of Associations as insurers. Bloyds Anderwriters 2an Association3
was operating in .imbabwe under some 5ind of gentlemen/s
agreement without formal registration. +ince Bloyds is not the only
organisation that may desire to operate in .imbabwe/s mar5et as
an Association, it is recommended that the Insurance Act be
amended to provide for registration of Associations as re:insurers.
Off!nc!s co##itt!d -' or $it unr!(ist!r!d "!rsons
The current Act is discriminatory in dealing with unregistered entities
doing business with registered persons. It penalises registered
companies dealing with unregistered entities. The proposal is to
penalise both the registered persons and unregistered entities
involved in the infringement of the insurance law.Co##ission #a'
Pr!scri-! Mini#u# Pr!#iu#s
7$. I&<C has e0perienced situations where a number of insurers
charge premiums which turn out to be inade6uate to meet claims
and other obligations. +ome 8overnment entities have found
themselves doing business with insurers charging uneconomic
premiums only for that insurer to fail to honour due claims. In this
regard, it is proposed that I&<C be empowered through the
Insurance Act to prescribe minimum premiums after consultation
with industry associations.
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R!#ission of Pr!#iu#s
7;. In addition, some bro5ing firms collecting premiums on behalf of
insurers fail to remit premiums timely, resulting in the insurer failing
to pay claims when they arise. To counteract this, the amendments
are proposing to empower I&<C to prescribe a period within which
bro5ers should remit premiums to insurers. In addition, the
Commission will also be empowered to dis6ualify certain premium
debtors from being treated as permissible assetsin the calculation
of solvency especially when their collectability is in doubt.
PENSION . PRO/IDENT FUNDS ACT
Ri(ts and Prot!ction of P!nsion Fund M!#-!rs 0Cor!
Princi"*! 12
7). <ffective regulation of the pensions industry depends on the
clarity and precision with which pension rights of members and
beneficiaries are defined.
$#. In terms of the &ension ' &rovident (unds Act, the accrued
rights of members and beneficiaries are not fully defined,
recognised and protectable. The ma>or wea5nesses are as follows":
The accrued rights of members are not clearly identified and
protected in the legislation9
There is no legislation preventing retroactive reduction in
benefits9
There is no specific laws protecting the vested benefits of people
who have left the employment of the employer9
There are no rules preventing forfeiture of pension e.g. loan
against employer9
The rights of members to investment income is not fully defined9
and
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There are no actuarial valuation guidelines and approval of
valuators.
$1. <ven though the >udicial system might wor5 well, pension rights
are not defined well enough for members to have enforceable
pension rights. +ome pension cases have been heard in
.imbabwean courts but this has not helped define pension rights.
To this end, the proposed amendments see5 to address these
deficiencies.
Fund M!#-!rs Prot!ction
$. 4ne of the ma>or wea5nesses of the &ension and &rovident
(unds Act is that pension fund member/s access to full contribution
record is not guaranteed. This is a serious wea5ness in a defined
contribution fund. In light of this deficiency, there is need to amend
the &ension and &rovident (unds Act to address the wea5ness of
non:disclosure.
S!"aration of Duti!s
$-. &ension entities should be re6uired to put in place internal
control arrangements that allow for segregation of duties. (or
e0ample, currently, there is no clear separation between those
responsible for investment and those responsible for settlement
and boo5:5eeping. Additionally, there is no separation between
those initiating investments and those implementing them.
P!nsion Funds Offsor! In%!st#!nts
$!. Investment abroad by pension funds should not be prohibited
and, among other ris5s, should ta5e into account the currency
matching needs between pension assets and liabilities.Currently,
the Act does not permit investments abroad, hence the proposal
toempower I&<C to prescribe levels of offshore investments from
time to time. These offshore investments should only be allowed
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sub>ect to compliance with re6uired investment thresholds in
prescribed assets. <.gs
/a*uation of P!nsion Ass!ts
$,. In terms of the I4&+ standards, the legal provisions for pension
fund regulation should re6uire pension assets to be valued for
accounting, reporting, actuarial and funding purposes. The legal
provisions should establish a proper, transparent and disclosed
basis for valuing pension assets. This should address the current
deficiency where there are no guidelines on valuation of pension
assets and the disclosure is not clearly specified.A case in point is
that of the conversion process from .imbabwean dollar pension
values to multi:currency.
CROSS CUTTING ISSUES
On3sit! Ins"!ctions
$7. In terms of the Insurance Core &rinciples, I&<C/s primary
legislation should provide the supervisor with wide:ranging powers
to conduct on:site inspections and gather information deemed
necessary to perform its duties. Advance notice to the insurer is not
a necessary re6uirement before conducting an on:site inspection.
$$. In line with this re6uirement, section -# of the Insurance Act
provides for the Commissioner to do on:site inspections but mostly
in cases where wrongdoing is suspected. Therefore, there are no
e0plicit powers to do normal?general on:site visits. In this regard, it
is proposed to amend the Insurance Act and the &ension and
&rovident (unds Act to give I&<C powers to conduct on:site
e0aminations on all regulated entities under the supervisor/s
purview, including pension funds and insurance bro5ers.
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Pu-*ic Disc*osur!
$;. I&<C should have the legal powers to ensure that insurers
disclose relevant, comprehensive and ade6uate information on a
timely basis in order to give policyholders and mar5et participants a
clear view of their business activities, performance and financial
position. This is e0pected to enhance mar5et discipline and
understanding of the ris5s which an insurer is e0posed to and the
manner in which those ris5s are managed.
$). In the .imbabwean case, there is limited disclosure as only listed
companies/ information is disclosed but generally hidden in holding
companies or group statements. Although annual financial
statements are filed in terms of sections -#:-1 of the Insurance Act
2for insurers3 and section -$ of the same Act 2for bro5er3, it should
be noted that statutory returns are not public documents, hence
the need for public disclosure in that regard through newspapers
and websites.
;#. In addition, it is proposed that filing of returns to I&<C be done
on a 6uarterly basis as well.
;1. Moreover, actuarial statements, solvency reports, detailed
information on prices, earnings, investment returns, ris5, and capital
ade6uacy, among other important information pertaining to the
insurer or bro5er are not public information. To this end, the
proposed amendments see5 to ensure that this information is
disclosed for the good of the public.
Anti3Mon!' Laund!rin( and Co#-atin( t! Financin( of
T!rroris# 0AML4CFT2
22
;. According to the (inancial Action Tas5 (orce 2(AT(3
re6uirements, countries should have AMB?C(T (ramewor5s to
combat the twin evils of money laundering and terrorism financing.
In this conte0t, the insurance regulator is a competent authority with
the responsibility of ensuring that its regulated entities comply with
AMB?C(T re6uirements.
;-. In this regard, proposed amendments to the Insurance and I&<C
Acts should clearly empower I&<C to enforce AMB?C(T measures
developed by the (inancial Intelligence Anit established in terms of
the =an5 Ase &romotion and +uppression of Money Baundering
Act, to monitor and enforce compliance by insurers and other I&<C
licenced intermediaries.
Cross3-ord!r Coo"!ration and Coordination on Crisis
Mana(!#!nt
;!. There is no legal bac5ing to support I&<C to enter into
international cooperation agreements with foreign supervisors.
Information is shared on a needs basis. In this regard, amendments
are being proposed to the I&<C Act to empower the supervisor to
cooperate with other >urisdictions in cases of possible cross border
crisis management.
;,.
;7. IC& 7 re6uires that I&<C cooperates and coordinates with other
relevant supervisors and authorities to ensure effectiveness and
efficiency management. As far as legal framewor5s and
confidentiality regimes allow, I&<C should share with other relevant
supervisors, at a minimum, information on the following"
group structure 2including legal, financial and operational
intergroup dependencies39
inter:lin5ages between the insurer and the financial system in
each >urisdiction where it operates9 and
potential impediments to a coordinated solution.
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Count!rin( Fraud in Insuranc! and P!nsion Institutions
;$. The deficiency in the I&<C administered legislation is that there
are no provisions dealing with countering fraud in insurance,
especially by the employees of the supervised entities.
;;. It is the re6uirement of IC& 1 that I&<C should have the power
to ensure that insurers and other licenced intermediaries ta5e
effective measures to deter, prevent, detect, report and remedy
fraud in insurance. (raud in this case should be addressed by
provisions which prescribe ade6uate penalties for committing such
fraud and for pre>udicing an investigation into fraud.
;). It is therefore recommended that I&<C be empowered to
cooperate, coordinate and e0change information with other
competent authorities, such as law enforcement authorities, as well
as other supervisors concerning the development and
implementation of policies and activities to deter, prevent, detect,
report and remedy fraud in insurance.
Conc*udin( R!#ar)s
)#. The amendments being proposed are based on the realisation
that our insurance sector legislation is lagging behind mar5et
developments due to the absence of effective statutory monitoring
mechanisms. Addressing the gaps identified through the +A1C
assessment in the spirit of harmonisation initiatives of insurance
regulatory framewor5s within the +A1C region will also
demonstrate .imbabwe/s commitment to fulfil its obligations under
the +A1C (inance and Investment &rotocol.
Su-#ission of t! A#!nd#!nts
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)1. I therefore submit the principles on the proposed amendments to
the Insurance and &ensions Commission Act [Chapter !"1%, the
Insurance Act [Chapter !"#$% and the &ension and &rovident
(unds Act [Chapter !"#)% for consideration by the Cabinet
Committeeon Begislation. All the proposed amendments reflect best
practices in insurance and pension regulation as developed by the
International Association of Insurance +upervisors 2IAI+3 and the
International 4rganisation of &ension +upervisors 2I4&+3.
Eon. &.A. Chinamasa, M&
MINISTER OF FINANCE AND ECONOMIC DE/ELOPMENT
! July #1!
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