A commission of inquiry into the conversion of insurance and pension values to the United States dollar from the Zimbabwean dollar says there was regulatory capture through failure to have operational independence among government, insurance regulator and players.
BY NDAMU SANDU
In its report released two weeks ago, the commission said the regulatory structure in Zimbabwe had three hierarchical strata — government through the ministry of Finance (first stratum), Insurance and Pensions Commission (Ipec) as the regulator (second stratum) and industry players in the form of institutions and individuals (third stratum). The commission said office bearers should not straddle across the strata to achieve independence and objectivity.
The commission was appointed in 2015 to provide government as well as the insurance and pension stakeholders with a common understanding of the conversion process as well as to provide a transparent process of addressing the concerns of policyholders and active members of pension funds and pensioners over the conversion process. It covered the period 1996 to 2014.
The commission said there were breaches of these principles of independence and objectivity in that actuary Douglas Hoto was sitting on the Ipec board, was chairman of the Actuarial Society of Zimbabwe while also being CEO of Altfin Life Assurance.
“This saw him [Hoto] straddling across the second and third strata, resulting in a conflicted initiative where the board industry was directed by Ipec [whereat he was a board member] to do actuarial reports for the conversion of insurance and pension liabilities from ZW$ to US$. Through his consultancy vehicles, he created a monopoly to exploit this opportunity for pecuniary gain. The commission subsequently adjudged these reports to be prejudicial to policyholders and pension funds,” the report said.
The commission said the presence of Richard Muirimi on the Ipec board created a conflict of interest as he was a controlling shareholder of pension administrator Comarton Consultants.
It said there was also conflict of interest in the late Elisha Mushayakarara, who was chairman of ZB Life and chairman of the Ipec board at the same time.
“Notwithstanding his passing-on, it is no wonder therefore that ZB Life was the least co-operative insurance company and its data submission to the commission was the most shambolic. That culture of non-compliance with regulatory issues could have emanated from a tradition of non-compliance on the above conflict of interest,” the commission said.
The Justice George Smith-led commission said permanent secretary of Finance Willard Manungo was an ex-officio member of the board, a situation which they found problematic as he was the “key driver” of the first stratum of regulation and was responsible for monitoring the performance of Ipec.
“In consideration of the above, the performance of Ipec was within the permanent secretary’s ambit and he was conflicted in the event of non-performance,” the commission said.
It rapped Ipec for failing to implement risk-based supervision in the market, design and implement a conversion basis from Z$ to US dollars, the shambolic state of the industry with financially unsound products and reliance on financially unsound processes. This, the commission said, was “suggestive of a board which lacked the skill and capability to provide effective oversight over operations of the insurance and pensions industry”.
The commission accused Ipec of sleeping on the wheel after failing to initiate and champion measures to protect policyholders and pension fund member values. It said the insurance regulator failed to provide guidance to the industry during the periods of inflation, when the Z$ was debased in 2006, 2008 and 2009 at the time of conversion.