Implementation of the Zimbabwe Integrated Capital and Risk Programme (ZiCARP) is set to commence this second quarter, with insurance firms expected to carry out parallel runs of programme from the current quarter’s reporting.
ZiCARP is a risk-based capital solvency regime that seeks to address the shortcomings that have been identified within the local insurance industry.
“It is expected that for second quarter 2021 reporting, entities will submit parallel runs of ZiCARP and Statutory Instrument 95 of 2017 to the commission. Further parallel runs will be expected during the third and fourth quarter 2021 submissions,”
said Insurance and Pensions Commission (IPEC) Commissioner Dr Grace Muradzikwa this week.
“Entities are expected to report on ZiCARP from 2022 onwards.”
ZiCARP is split into three pillars. These are: Pillar I, which consists of quantitative aspects where there is need for insurance entities to determine Solvency Capital Requirement (SCR) and Minimum Capital Requirement (MCR).
“At a very high level, SCR is the aggregate amount of capital that an insurer is expected to hold, to ensure that the organisation can survive the most extreme expected losses over the course of the year,”
said Dr Muradzikwa.
Pillar II is composed of Own Risk and Solvency Assessment (ORSA). ORSA is expected to be an integral part of business strategy and must be considered when making strategic decisions.
And Pillar III, that is, disclosure requirements to IPEC and the public. With regards to this pillar, various returns will be submitted quarterly and annually to the regulator.
The new risk-based capital solvency regime has a number of benefits including ensuring a clear understanding of an insurer’s most significant risks and their impact on the balance sheet; alignment of the insurer’s strategic goals and objectives; alignment of risk appetite and strategy; improvement of capital deployment and resource allocation; and enabling effective measurement of business performance.
It will also help in the reduction of operational surprises and losses; and will allow for the alignment of local insurance practice with international best practice.
Added the IPEC Commissioner:
“ZiCARP is a continuous revolving solvency regime, as such insurers should be flexible in their approach and willing to regularly engage with the Commission when a change in certain aspects of the solvency regime is necessary.
“We, therefore, expect continuous engagements between IPEC and the insurance sector.”