The Life Office Association of Zimbabwe has said that government should inject money to compensate policyholders and pensioners whose savings were wiped out by hyperinflation when the country embraced the multi-currency regime in 2009.
BY VICTORIA MTOMBA
Life Offices Association (LOA), chairman Simon Chapereka told Standardbusiness that the conversion was dogged by loss of value as perceived by policyholders.
Chapereka said the loss of value could be atributed to the general economic decline during the hyperinflation era which saw the rebasing of the Zimbabwean currency by the removal of 25 zeros.
He said there were classes of assets which did not convert, such as money market instruments, cash balances, treasury bills and municipal bonds
“As the Life Offices Association, we believe there are things which can or need to be done to restore some value to policy holders,” Chapereka said.
“We believe that the government needs to honour the prescribed assets and municipal bonds.
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“The government needs to bail out the pensioners and policyholders by making a lump sum injection.
“We have seen this happen in some economies where pensioners and policyholders have lost value in similar circumstances.
“Those shareholders of insurance companies, if they can afford, need to consider additional capital injection into the companies.
“Lastly, management of insurance companies needs to perform to ensure value creation for the policyholders.”
Pensioners and policyholders, among others, lost money during the Zimbabwean dollar era due to loss of value and hyperinflation.
Those who had saved their money in pension funds were not able to get any compensation from the pension funds, or from government.
Chapereka said each life office did its own conversion according to the guidelines issued by the International Accounting Standards and the input from their actuaries and auditors.
He said there was a conversion committee that was formed to look at the conversion process done by the association’s members.
The committee comprised actuarial staff from (LOA) members offices namely Fidelity Life, ZB Life, Zimnat, Nyaradzo, FML, Old Mutual, FML Re and Baobab Re Life.
During the conversion period, some of the assets only realised a fraction of the value like equities which were on hand.
Chapereka said some companies liquidated and investors were left holding worthless share certificates and some property investments were revalued but none managed to maintain the hyperinflation values as they had been over-valued.
President Robert Mugabe recently set up a commission of inquiry to, among other issues, propose how pensioners would be compensated.
The commission’s secretary Cuthbert Munjoma said its role was to inquire into the matter at hand and to provide a written report on its findings and recommendations to the President.
“It is the President who determines the course of action to take following receipt of our report and recommendations,” he said.
“We are therefore not able to comment on or to answer your questions, suffice to say the commission has commenced its work and an update on the commission’s work will be provided to all stakeholders in the near future.”
A total of 1,2 million pensioners in the country lost the value of their pensions between 2000 and 2008.
Last year, the Ministry of Finance commissioned a study through Insurance Pensions Commission to determine the values of those policies in the post dollarised environment.
In June, the central bank demonetised the local unit, setting aside $20 million to pay Zimbabwe dollar balances.
