Friday, January 02, 2009
Written by Chibaula Silwamba
Friday, January 02, 2009 3:07:57 PM
THE Pensions and Insurance Authority (PIA) has revealed that Zambia State Insurance Corporation (ZSIC) subsidiary companies do not qualify to be licensed as insurance companies because of some irregularities contrary to the law.
And PIA registrar Chris Mapipo has queried ZSIC for abrogating the law by appointing a person who does not meet the requirement of 10 years experience in the insurance industry as its managing director for the ZSIC Life Company.
According to Mapipo's letter dated December 26, 2008 to ZSIC Limited managing director Irene Muyenga and obtained by The Post in Lusaka, PIA issued the licences to ZSIC Life Company and ZSIC General Insurance Company with “great reluctance” but with strict instructions that ZSIC normalises all the issues it was queried on by March 31, 2009 latest.
“Firstly, we wish to advise that the mandate for you to operate as a composite insurance company expired on 23rd December 2008. This entails that you no longer have the capacity to enter into or sustain an insurance contract from that date,” stated Mapipo in a letter copied to Ministry of Finance permanent secretary Dr Wamundila Mbikusita-Lewanika and PIA board chairman Smart Phiri.
“The three year period granted to Zambia State Insurance Corporation Limited to reform itself has certainly been sufficient time for you to have transferred all contractual obligations to the two separate insurance companies that have been formed.”
On share capital, Mapipo stated that all entities licensed by PIA submit copies of their bank statements as proof of capitalisation.
“Kindly ensure that the relevant bank statements are submitted by 31st December 2008,” he stated. “Your company was given a list of our licence requirements. The schedule clearly indicated that the business plan must show three years projections of the balance sheet, profit and loss account and revenue accounts. We are at pains to understand why despite the three year grace period you are unable to submit these details.”
Mapipo stated that ZSIC's submission on the matter was incomplete.
“We wish to advise that this is probably the first time we are having problems accepting a business plan from an existing insurer. Kindly ensure that a proper plan is submitted by 31st January 2009,” Mapipo demanded.
Mapipo also expressed dissatisfaction with the submission on reinsurance.
“Your submission on this point raises great concern. Zambia State Insurance Corporation Ltd ceased to carry out business on 23rd December, 2008.
In the circumstances, the new insurance companies need to arrange their own reinsurance programmes for the risks that they will carry. They cannot rely on the contracts entered into by the holding company for the entire first quarter,” Mapipo stated. “If indeed there is an understanding that the reinsurers of the holding company will provide cover for the newly formed companies, this must be evidenced in writing.
As you are well aware, Section 102 of the insurance Act especially requires insurers to submit reinsurance treaties or reinsurance programmes to the authority. It is of great concern to us that there is no evidence of reinsurance protection for the first quarter of 2009. Given the time that you have had this should have been done in time. Kindly ensure that this is carried out by 31st January 2009.”
And on the appointment of a chief executive officer/managing director of ZSIC Life Company, Mapipo noted that the law was very clear and PIA would not allow any person who does not meet the requirements to take up such a position.
“The provisions of Section 26 (4) (b) are binding and cannot be altered by my office. Kindly ensure that you appoint an individual with the required experience by 31st March, 2009,” stated Mapipo in reiteration to his earlier letter dated November 26, 2008, in which he wrote:
“The proposed chief executive officer does not meet the 10 years experience required under Section 26 of the insurance Act. The Act does not provide for a separate officer. The chief executive officer is the principal officer of the company.”
Mapipo demanded that ZSIC complies with the law.
“It is with great reluctance that we, therefore, grant you the licences for your subsidiary companies. From what is outlined above, your companies do not qualify to be licensed.
However, in the interest of the nation and hoping you will be compliant, the licenses have been issued. Kindly take our observations and deadlines seriously,” Mapipo stated.
“Licence numbers 0049 and 0042 are issued respectively in favour of Zambia State Insurance Corporation General Limited and Zambia State Insurance Corporation Life Limited.”
In his earlier letter dated November 26, 2008, Mapipo stated that his office acknowledged receipt of an application for a long term insurer's licence submitted by ZSIC for its subsidiary company [ZSIC Life Limited] but PIA could not make full analysis of the application because ZSIC did not supply adequate information.
“The application form for a licence needs to be signed by a director of the applicant company. In the application form that has been submitted, this has not been done. No three year business plan has been submitted. There is no evidence provided to show that share capital has been paid for. A list of all assets and liabilities of the company needs to be provided as required by Section 10 of the insurance Act,” Mapipo stated.
“Employees listed as branch managers are the same as those listed under Zambia State Insurance Corporation General Ltd. The employees cannot work for two insurance companies.”
Mapipo further demanded that there was need to clearly outline the services that would be covered by the holding company [ZSIC Ltd] and the terms of engagement.
“I would further suggest that you consider holding on to your plans to launch the company until full compliance is met,” advised Mapipo.
But ZSIC company secretary Anock Mbambala said ZSIC had resolved all the queries that PIA had raised.
“Those were preliminary enquiries that PIA was making during the split period. After that letter [of November 26] we clarified all those [queries]. That is why the licenses were granted. Naturally, during the preliminary process, there is that interchange of ideas. They were enquiring on certain things and after some discussions and write ups all those were clarified. Eventually they issued a licence…I think that was two or three days ago,” Mbambala said.
Asked about the query on the managing director of ZSIC Life Company who does not meet the qualifications, Mbambala responded: “Even that we discussed with PIA and it was resolved. It was one of the issues that they raised.”
Further asked if ZSIC had found another person with 10 years experience required by law or it had maintained the same appointee, Mbambala said that the appointee was suitable.
“He is actually suitable.
There was just some misunderstanding…he has the 10 years experience. This is an individual who was working for…I think Stanbic [Bank] for five years then he worked for African Life Assurance for another five years and then he has worked with us,” said Mbambala.
However, Mbambala's argument contradicts the law because the insurance Act requires that the appointee to the position of managing director/CEO of an insurance company should have 10 years experience in the insurance industry and not any other field.
ZSIC has transformed into a holding company called ZSIC Group of Companies or simply ZSIC Limited, which would manage two subsidiary companies - ZSIC Life Company and ZSIC General Insurance Company.