Covid-19 lockdowns hit Zimbabwe’s funeral assurance firms

By Bernard Mpofu

Prolonged lockdowns to control the spread of Covid-19 are taking a toll on Zimbabwe’s funeral assurance companies with less than half of the firms now undercapitalised, the regulator has revealed.

Zimbabwe has been under a national lockdown since April last year to reduce the spread of the respiratory ailment after new cases and fatalities spiked after the festive season.

In its funeral assurance report for the year ended December 31, 2020, the Insurance and Pensions Commission (Ipec) said the disruptions to the economy due to the lockdowns were weighing heavily on the industry.

“Three out of the eight funeral assurers reported capital positions that were compliant with the regulatory minimum capital requirement of $62,50 million as prescribed in Statutory Instrument 59 of 2020,” reads part of the Ipec report.

“Mandatory lockdowns due to Covid-19 disrupted business operations and income streams during the year.” 

Covid-19 effects on the economy have exacerbated the problem of policy lapses, and delayed payment of pensions contributions, premiums and benefits as well as claims. 

The new normal also brought about additional operating costs for insurers and pension fundsas they sought to capacitate staff to work remotely.

“As at 31 December 2020, all funeral assurers were not compliant with the minimum prescribed asset ratio of 10% as stipulated by the Statutory Instrument 206 of 2019,” Ipec said.

“The total amount invested in prescribed assets was $0.21 million against the required minimum amount of $86.79 million, which is 10% of the industry’s total adjusted assets.”

Ipec said during the period under review, none of the funeral assurers had any reassurance arrangement in place, meaning the sector remained vulnerable to economic shocks.

Despite being undercapitalised, the funeral assurance industry’s inflation adjusted gross premium written (GPW), increased by 76.81% from $34.56 million for the 12 months-ended December 31, 2019 compared to $61.11 million for the period ended December31, 2020.

“Profit before tax for the funeral assurance industry increased in absolute terms by 830% from$5.04 million for the year-ended 31 December 2019 to $46.88 million for the year-ended 31 December 2020,” the report added.

“In real terms the profit before tax increased by 107% from ZW$5.04 million for the year-ended 31 December 2019 to ZW$10.45 million for the year-ended 31 December 2020.” 

For the 12 months-ended December31, 2020, two players dominated the funeral assurance sector in terms of GPW with a total market share of 81.25%. 

The remaining six funeral assurers accounted for the difference of 18.75%, Ipec added.

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