In a move to ensure wider compliance to new regulations, the Insurance and Pensions Commission (IPEC) has requested players in the sector to submit compliance reports with respect to Circular 11 of 2020.
Circular 11 of 2020 (Risk Management and Corporate Governance Guidelines) is one of the several new guidelines that the regulator has issued over the past few months, but is arguably one of the most important given the sector’s fallout in the previous decade.
The Justice Smith Commission of Inquiry Report highlighted issues within the sector that contributed to the devastating loss of value during the previous hyperinflation era, which needed to be addressed.
These included inadequate legislation and regulatory failure; poor corporate governance; poor record keeping; poor accounting, auditing, actuarial and other risk management practices.
The Risk Management and Corporate Governance Guidelines were issued on June 9, 2020 and the effective date of implementation was July 1, 2020.
Reads part of IPEC commissioner Dr Grace Muradzikwa’s letter to insurance firms and pension funds:
“It is our expectations that you have already started implementing the Circular. You will note that section 9.2.2 of the Guidelines requires submission of a Risk Management Declaration to the Commission on compliance with the Guidelines ninety (90) days after the end of the financial year.
“Notwithstanding this provision, the Commission would want to establish if the industry is on course in implementing the Guidelines.
“As such, you are required to submit a self-assessment compliance report by 30 October 2020.
“The report should clearly articulate the following: (a) The systems that each entity has or is putting in place for the purpose of ensuring compliance with the Guidelines. (b) Confirmation of risk management strategies developed in accordance with the requirements of the Guidelines. (c) The systems put in place or being developed to manage and monitor risks, and the risk management systems that are appropriate to the fund, having regard to such factors as the size, and complexity of the fund’s operations. (d) Action(s) taken by your board to ensure compliance with the Guidelines.”
In recent months, the insurance and pensions regulator issued 10 circulars covering a number of regulatory issues to the market, as well as developing six supervisory frameworks, manuals and policies in move to strengthen regulation of these critical sectors.
Insurance firms and pension funds are not usually perceived as being a significant potential source of systemic risk, but following the hyper-inflationary period circa 2009 and the resultant change in functional currency from the Zimbabwe dollar to a multi-currency system resulted in clients and pensioners losing their hard earned monies.
Currency reforms that began in 2018, culminating on the return of the Zimbabwe dollar last June have shifted the sector’s operating environment, and players have struggled to cope.
The re-emergence of strong hyper-inflationary pressures within the economy requires that the regulator is more proactive in dealing with emerging risks so that the loss of value that occurred circa 2008/2009 is not repeated.