Zimbabwe has effected new minimum capital requirements for insurance companies, through the promulgation of Statutory Instrument (SI)-59 of 2020.
The new minimum capital requirements were first announced by the country’s Finance and Economic Development Minister Mthuli Ncube in the 2020 National Budget last year.
According to SI-59 of 2020, insurance firms that carry out life assurance business – including funeral assurance – are now required to hold $75 million from $5 million, while those that provide non-life insurance business should hold $37,5 million from $2,5 million.
The statutes also require that local insurance companies, which provide reinsurance or reassurance business are required to hold a minimum capital requirement of $75 million.
Insurers that carry “on life assurance solely for the purpose of issuing funeral policies” are now required to have a base of $62 million, while insurers that provide micro insurance only are required to hold $4 million.
SI-59 of 2020 has also prescribed the minimum capital requirement for insurance brokers, that is, “every registered insurance broker shall effect and maintain a professional indemnity insurance with a limit of liability of not less than (a) $1,2 million; or (b) fifty per centum of such broker’s net brokerage income in his or her preceding year; whichever is greater.”
Inflationary pressures in the Zimbabwean economy have necessitated the upward review of minimum capital requirements.
“The obtaining macro-economic environment has necessitated upward review of minimum capital requirements for different players in the insurance industry to ensure that entities are well-capitalised for the protection of value for policyholders and pension members,” said the Finance Minister while announcing the 2020 National Budget in November 2019.