Zimbabwe’s funeral assurers struggle as Covid-19 deaths surge

By Bernard Mpofu

Zimbabwe’s funeral assurers are facing viability problems because they do not have reassurance arrangements on the back of high claims due to increased deaths attributed to Covid-19, the Insurance and Pensions Commission (IPEC), has warned.

In its quarterly report for the period ending March 2021, IPEC said only four out of eight funeral assurers met minimum capital requirements set by the regulator.

“All funeral assurers had no reassurance arrangements in place for the quarter ended 31 March 2021, resulting on a reassurance ratio of 0%,” reads part of the IPEC report.

“The commission continues to emphasise the need for funeral assurers to have reassurance arrangements so as to effectively manage their risk exposures. 

“In addition to increasing the amount of available capital, reassurance arrangements increase the capacity of the funeral assurers to write more business. 

“The need for reassurance is more apparent given the strain on the sector balance sheet on the back of high claims experience as a result of the current Covid-19 pandemic.”

IPEC said during the period under review the total technical liabilities for the funeral assurance sector increased by 11.66 percent from $221.92 million as at December 31, 2020 to $247.80 million as at March31, 2021.

Future policyholder benefits constituted 99.77percent of the technical liabilities.

The remaining 0.23 percent comprised of unearned premium reserve, incurred but not reported losses and gross outstanding claims.

“Increase in technical liabilities has been low as compared to the increase in premiums and asset values during the period under review,” IPEC added.

“This is indicative of continued mismatch in the asset-liability profiling of funeral assurers’ balance sheet.

“The funeral assurance sector reported an average current ratio of 123.21 percent indicating insufficient current assets to cover short-term contractual obligations. 

“The Commission urges funeral assurers to continuously monitor their investment portfolios so as to match their assets to liabilities.

“Asset-liability mismatch may result in players holding either inadequate liquid assets to settle claims or too much liquid assets thereby foregoing investment opportunities that may yield positive returns.”

The report showed that for the period under review, Moonlight and First Funeral dominated the funeral assurance sector with a combined market share of 80.82 percent. 

Vineyard, Passion, Foundation, Ruvimbo, Sunset and Orchid, held a combined 19.18 percent of the market.

“As highlighted in the previous quarterly report, funeral assurers are challenged to address the industry shortcomings so that they avoid being crowded out by life assurers,” IPEC said.

Zimbabwe has in recent weeks been witnessing a surge in Covid-19 cases with indications that the country is experiencing a third wave of the pandemic.

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