Bulawayo Bureau
THE Government is working on establishing a Policyholder Protection Fund (PPF) to provide cover to policyholders if an insurance house goes into insolvency.
This is expected to restore confidence in the insurance sector.
The PPF will be established under the Insurance and Pensions Commission Amendment Bill 2024, set into motion in December.
The initiative is meant to provide cover to policyholders if insurance companies fail to pay benefits due to closure or other challenges.
Responding to questions from Zimpapers Business Hub, Zimbabwe Association of Pension Funds (ZAPF) director general Ms Sandra Musevenzo said the PPF served as a vital safety net for policyholders and pension fund members in the event of an insurer or pension fund's insolvency.
She said the PFF sought to mitigate financial losses, saying that in the event of an insurance company or pension fund collapse, the PPF ensures policyholders receive compensation, preserving a portion of their savings.
Ms Musevenzo also said the fund would restore industry confidence as Zimbabwe's insurance and pensions sector had faced challenges due to past losses.
"The Policyholder Protection Fund is a result of the Justice Smith Commission of Inquiry, which also led to the compensation exercise for those who lost value in 2007, as outlined in SI 162 of 2023," said Ms Musevenzo.
"While the PPF serves a different purpose, it is a crucial component in safeguarding the interests of policyholders.
"To further clarify the regulatory framework surrounding the PPF, industry and stakeholder engagements are being held to discuss the bill. These discussions will provide valuable insights and help shape the future of the PPF."
Between 2007 and 2009, the country experienced a major hyperinflationary period, which eroded the value of most savings, including pensions.
Responding to stakeholder concerns, in 2015, the Government constituted a Commission of Inquiry to investigate the causes and extent of the loss of value from life insurance policies and pensions suffered following the conversion of the Zimbabwe dollar policies to foreign currency in 2009.
Retired judge Justice George Smith led the Commission of Inquiry, which found that most policyholders and pensioners were prejudiced during the conversion process and recommended that they be compensated.
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Ms Musevenzo added that the PPF's structured protection mechanism will boost policyholder confidence in investing in long-term insurance and pension products.
"The PPF encourages insurers and pension funds to maintain sound financial practices, holding reckless or undercapitalised entities accountable," she added.
Speaking at the Insurance and Pensions Amendment Bill public hearing held in Bulawayo on Tuesday, Parliamentary Portfolio Committee on Budget, Finance and Investment Promotion chairman and Masvingo South Legislator Tanatsiwa Mukomberi said, in terms of the Bill, insurance companies would contribute to the PPF such that in the event of them going insolvent, policyholders would be assured of getting their payouts.
In an interview, during the public hearing on Tuesday, Ms Maria Wami said those affected by pre-2009 hyperinflation should be considered so that they benefit from the PPF.
"Some of us, during our working days, we were contributing what was called retirement annuities, which was meant to augment our pensions when we retire, but come 2008, we were told, but insurance companies that our contributions had been wiped out by inflation and that was that," said Ms Wami.
"We were not compensated at all and this Bill has proposed a protection fund for pensioners and we would like to be included in this protection fund.
"Those who lost their contributions during the hyperinflation period should be compensated."
