The Insurance and Pension Commission will soon require all insurance companies to publish their financial statements regardless of whether they are listed or not.
IPEC commissioner Tendai Karonga yesterday said the move is aimed at instilling market discipline as there will be transparency and disclosure.
“The commission, through the proposed amendments to the Insurance Act, will require that all insurance companies publish their financial statements, regardless of whether they are listed on the Zimbabwe Stock Exchange or not.
“This will help in instilling market discipline since stakeholders will now be more informed and will therefore punish insurers whose financial statements will not be depicting a good standing,” said Mr Karonga.
The commission had discovered that there were policyholders entering into arrangements to pay premiums in instalments.
However, in some instances the premiums are never remitted to insurance companies.
Mr Karonga said insurance companies should therefore come up with policies whereby they account for the premium debtors when they have a realistic chances of receiving the premiums.
“The commission has come up with a position whereby, for example, short-term insurance companies are supposed to write off premium debtors aged more than 90 days. Against this background, we implore the accounting profession to always be on the lookout for treatment of premium debtors vis-a -vis regulatory requirements.
“This will ensure that regulated entities do not report ‘fictitious’ assets, which create a false sense of security to their customers,” said Mr Karonga.
He added that liabilities feeding into audited financial statements for insurance companies should be actuarially determined.
Mr Karonga said the commission continues to note challenges in the market where actuarial valuations are conducted only after an audit for insurance companies.
In extreme cases, he said the actuarial valuations are not even conducted, a situation which casts doubt on the values of liabilities reported.
“We believe that under subdued economic conditions, actuarial valuations should be conducted annually. We recognise that this has cost implications but the cost of not doing actuarial valuations is higher,” he said.
Mr Karonga said the accounting profession also needs to interrogate valuation reports which form the basis of figures reported by insurance companies.
This is in view of the fact that some asset valuations are being conducted by unqualified parties such as loss adjustors.
He said since the adoption of the multicurrency regime, IPEC has on a number of occasions reviewed minimum capital requirements.
In a bid to comply with the revised minimum capital requirements, some insurers have revalued their assets.
Mr Karonga said the situation is worsened if the revaluation is conducted by unqualified and conflicted valuators.
He said, when conducting audits, the accounting profession should be on the lookout for such issues and report them to the commission.
Mr Karonga added that going forward insurers are now called to pro-actively conduct solvency self-assessments.
He said this will call for skills upgrades of the regulated entities themselves and the need for auditing firms to train their personnel on how to review the self-assessments. The Herald
