By A Correspondent

Move raises questions over confidence in local currency as authorities aim to shore up insurance sector stability…

HARARE – In a clear signal of dwindling confidence in Zimbabwe’s local currency, the government has officially pegged minimum capital requirements for insurance firms in United States Dollars, abandoning the recently introduced ZiG as a standard for regulatory thresholds.

The new capital benchmarks, gazetted this week, are aimed at bolstering the resilience and credibility of Zimbabwe’s insurance industry. The shift away from local currency comes amid persistent inflationary pressures and volatility that have eroded the real value of insurance firms’ capital reserves.

Insurance and Pensions Commission (IPEC) Commissioner Dr Grace Muradzikwa said the USD-indexed requirements are necessary to maintain the sector’s ability to fulfill its core obligation: paying claims.

“As IPEC, our mandate is to protect the interests of policyholders and pension scheme members. The United States Dollar indexed capital thresholds are a step in that direction,” she said. “The new minimum capital requirements for life companies are pegged at US$2 million, Funeral Assurers at US$500,000, Short-Term Insurers at US$1.5 million, Reinsurers at US$2 million, Micro-Insurers at US$100,000, and Insurance Brokers at US$100,000.”

Muradzikwa was candid about the rationale behind the move, pointing to the erosion of value under the local currency regime.

“Previously, capital requirements were set in local currency. However, due to inflationary pressures and currency volatility, the real value of those requirements was significantly eroded. This undermined the very objective of capital adequacy,” she said. “We are now taking corrective measures to ensure firms maintain a financial buffer that enables them to absorb shocks and meet obligations to clients.”

While regulators insist the decision is grounded in sound financial principles, the move is also being read as a tacit vote of no confidence in the ZiG currency launched earlier this year to replace the beleaguered Zimbabwe dollar.

Analysts note that the shift could set a precedent for other sectors to follow suit, further sidelining the local unit in favor of more stable foreign currencies.