AS companies continue to close shop due to the adverse economic climate, the insurance sector will this year focus on tapping into the growing informal sector, a senior industry official has said.
Scores of the major companies that used to employ tens of thousands of workers are either on the verge of collapse or have closed down leaving workers stranded.
A July 2013 National Social Security Authority (Nssa) Harare Regional Employer Closures and Registrations Report for the period July 2011 to July 2013 shows 711 companies in Harare closed down, rendering 8 336 people jobless.
In addition, many companies are downsizing and have retrenched tens of thousands of employees, condemning them to a gloomy future.
"Because of company closures the insurance sector is looking into the informal sector," Insurance Institute of Zimbabwe president Chomi Makina told businessdigest. "A number of insurance companies have now come up with innovative microfinance products for the sector."
Makina, who is also the Moonlight Funeral Assurance group chief executive, said a large percentage of the company's business comes from players in the informal sector. Such business would help limit the impact of the premiums lost due to the closure of companies as well as retrenchments.
Makina welcomed Finance minister Patrick Chinamasa's confirmation in the 2014 national budget that the multi-currency regime would continue saying this would help boost much-needed confidence in the insurance sector.
"There has been lack of confidence in the market. We are grateful that the foreign currency regime is going to stay thereby bringing confidence to the sector," he said.
Makina said further confidence in the market would be instilled by the demonetisation of the Zimbabwe dollar.
Chinamasa announced during the budget that Zimbabwe dollar account balances would be repaid through issuance of Treasury Bills. An estimated US$20 million has been set aside for the exercise to compensate Zimbabwe dollars in financial institutions' books as at January 31 2009.
The Finance ministry will issue Treasury Bills to the respective financial institutions for them to further credit bank accounts of their clients by March 31.
Makina also welcomed the establishment of the Insurance and Pension Sector Fund in the budget saying it would go a long way in reducing the national housing backlog.
The fund is expected to be financed from proceeds of housing bonds to be issued to companies in the pension and insurance industry.
He said they were still awaiting the introduction of the Micro Insurance Bill which will allow new small to medium players who cannot raise high capitalisation requirements to participate in the sector.