FINANCE Minister Tendai Biti on Thursday hiked minimum capital thresholds for insurance companies and brokers by between 350 to 500 percent in a bid to boost the underwriting capacity of the industry. Minister Biti said insurance companies are expected to have met half of the new capital requirements by June 30, 2013 and should be fully compliant by June 2014.
According to the national budget presented by the minister life assurance companies and non-life insurance companies would be required to have minimum capital US$2 million and US$1,5 million up from US$500 000 and US$300 000 respectively.
The new minimum capital requirements for non-life insurance, life re-insurance and funeral assurance companies are now US$1,5 million from US$400 000.
Composite insurance companies should increase their capital level to US$3 million from US$800 000.
Professional indemnity for both insurance and re-insurance brokers was raised to US$200 000 from US$100 000 respectively.
Minister Biti said the increase in minimum capital thresholds was also meant to enhance the protection of policyholders in line with regional and international best practices.
He also indicated that the move had been implemented in consultation with the Insurance and Pensions Commission of Zimbabwe and the industry.
"The current low underwriting capacity on the local market is resulting in externalisation of premiums where large risk is involved, for instance, risks associated with mining and aviation business," he said.
Meanwhile, the performance of the industry has continued to improve, with gross premium written having jumped 20 percent to US$231 million by June 2012.
"The industry has continued to grow, with underwriting profit up by 175,32 percent to US$6,6 million in June 2012 compared to the same period last year.
"The above trend is projected to be maintained during the rest of 2012 and into 2013," he said.
The industry however achieved depressed earnings as a result of limited investment opportunities.