Currency worries unsettle insurers

Source: Currency worries unsettle insurers | The Financial Gazette October 12, 2017

By Paul Nyakazeya, Online Editor

ZIMBABWE’S insurance industry is struggling to preserve the value of its investments due to a persistent foreign currency crisis, an industry executive has said.
NicozDiamond managing director, Grace Muradzikwa, said maintaining value of money set aside or saved for future use was a challenge the insurance sector was facing as the country was grappling with a severe shortage of foreign currency and uncertainty over bond notes.

The erosion of value and lack of confidence in the local currency, which has come at a time inflation has started creeping up, has brought back memories of the hyperinflationary era.
“Insurance is all about spreading risk, while all sector players were doing their best to come up with various products to serve their purpose, value preservation of reserve will become a major challenge. Failure to manage this looming challenge could result in us going back to the 2008 era,” Muradzikwa told The Financial Gazette.

Zimbabwe’s insurance industry is well developed, although it remains small due to economic problems over the past 15 years.

It consists of short-term insurance, life assurance, funeral assurance, pension funds, medical insurance and loss adjusters.

She said the performance of the insurance industry was positively correlated with the performance of the economy hence value preservation was a cause for concern for the industry.
She said the multi-currency environment had managed to alleviate some challenges facing the insurance sector but bond notes had “created unease and had brought back memories” of the hyperinflationary era.
During the hyperinflationary environment, most companies in various sectors of the economy lost their clients’ trust.

There has been an improvement in trust levels since the adoption of multi-currency system in February 2009.

Commenting on the insurance product uptake, Muradzikwa said many people had responded to the call to insure their assets, although they were still facing challenges such as low disposable incomes, liquidity constraints and uncertainty over economic policies.