The Zimbabwe reinsurance industry may fail to underwrite external business due to the Reserve Bank of Zimbabwe (RBZ)'s failure to settle foreign obligations in excess of $10m in retrocession premiums.
Reinsurance players point out that the enactment last year of Statutory Instrument SI 142 has crippled their ability to repatriate retrocession premiums, with some of the legacy debts dating back to over five years, reported The Independent. Through SI 142, government bans the use of foreign currencies, making the Zimbabwe dollar the sole legal tender.
However, the move has led to the rapid depreciation of the local unit to the greenback, decimating incomes and pensions.
Following the introduction of SI 142, the central bank committed to assuming foreign legacy debts at a rate of ZW$1:$1.
Zimbabwe Association of Reinsurance organisations (Zaro) chairperson, Leo Huvaya said that all reinsurers had complied with an RBZ directive to submit their legacy debts, but the central bank had not been forthcoming when it comes to honouring the agreement. The reinsurers need to make payments in foreign currencies for their overseas business.
Nr Huvaya said, “So, we have been in the queue for a while and we haven’t been getting priority. This means if we have a major claim, we might be exposed, as we will not be able to settle it. These legacy debts are dating back to five years and we have continuously failed to have access to foreign currency.”
He added, “You can’t be a reinsurer for just one market. We need to do business with other markets, but at this rate it’s now very difficult. The central bank has not been not been saying anything. We don’t know when we will get the money,” he said.
Huvaya has informed Finance Minister Mthuli Ncube about the sector’s predicament. In response, Ncube said he was aware of the retrocession legacy debts, but pointed out that it was an issue for the central bank.
There are several reinsurers in Zimbabwe, including Emeritus Reinsurance, Baobab Re, Colonnade Re, FBC Re, PTA Re, Tropical Re and ZB Re.