Update on the Pensions and Insurance Regulatory Framework



ON 26th MAY 2021

Good morning to all our colleagues from the media. Let me start by welcoming you to the Pensions and Insurance Authority (PIA) media briefing. I am sincerely grateful that you could spare some time to be with us this morning. It has not been easy to have frequent physical interactions with the media due to the Covid-19 pandemic. However, we are grateful for the support that you have continued to render by consistently reporting on pensions and insurance matters. We look forward to continue working with the media in disseminating information relating to the pensions and insurance industries.

The purpose of this briefing is to provide an update regarding developments in the pensions and insurance regulatory framework. 

1. The Pension Scheme (Investment Guidelines) Regulations, S.I. No. 50 of 2021

The Authority welcomes the revision of the Pensions Scheme Investment Guidelines (S.I 141 of 2011) through the issuance of The Pension Scheme (Investment Guidelines) Regulations, S.I. No. 50 of 2021 by the Minister of Finance on 12th May 2021. 

As you may be aware, Pension Funds play a pivotal role in a country’s development and in contributing to economic growth particularly through providing financing to productive investment activities. Over the years, it had been noted that the Investment Guidelines remained static yet there have been many emerging investment opportunities and changes in the world economies. Therefore, the revised guidelines have been developed to be more responsive to economic and emerging investment opportunities. 

The following are the salient features of the Investment Guidelines:

a) Removed minimum limits on collective investments schemes and corporate bonds

This has been done to ensure that schemes invest in classes of investments to maximize the investment return for their members based on risk and age profiles unique to each scheme.

b) Increased threshold  in investment classes

The following classes of investments have had their threshold increased:

  1. Private Equity from 5% to 15%
  2. Property from 30% to 40%, which will include indirect investments in property such as collective investment schemes and equity.
  3. Corporate bonds from 7.5% to 10% investment  in a single company and
  4. Collective investment schemes from 10% to 20% in a single  unit trust

c) Introduction of new investment classes

The Guidelines have introduced new investment classes as follows:

  1. Supranational bonds to enhance more diversification for the pension schemes. Pension Schemes will be allowed to invest up to 30% of its fund size in financial instruments issued by a supranational entity.
  2. Pension Schemes are not allowed to invest in derivatives, hedge funds or any other speculative investments except for risk management purposes only. However, this class of investment will require approval from the Registrar.
  3. Schemes may invest in any other investments not listed in these guidelines provided that approval has been obtained from the Registrar.

2. The Insurance (Fidelity Fund) Regulations, S.I. No. 38 of 2021

The Insurance Act No. 27 of 1997 (as amended by Act No.26 of 2005), under Sections 109, 111 and 113 confers powers on the Minister, by Statutory Instrument, to establish an Insurance Fidelity Fund and to prescribe regulations with respect to the administration, management and application of the Fidelity Fund for the purpose of indemnifying or otherwise protecting policy holders and other persons interested in the policies prejudiced by the inability of an insurer carrying on business in Zambia, to meet its liabilities.

It is in this regard, that on 6th May 2021, the Honourable former Minister of Finance Dr Ng’andu Bwalya issued the Insurance (Fidelity Fund) Regulations, Statutory Instrument

No. 38 of 2021 (“the Regulations”).

 The Regulations are meant to operationalise the Fidelity Fund which will be administered by the Policy Holder Protection Committee. The Regulations have set out the rules to be followed in making a claim including  determination of when to make a claim and the amount to be paid. 

Further, the Regulations limits the payment out of the Fund for each Insurer or Insurance Broker in default, to 10% of the value of the Fund as at 31st December of the previous year of the application date. 

3. The Insurance Act No. 38 of 2021

The Authority welcomes the passing of the Insurance Act No. 38 of 2021 in the last session of Parliament. It remains our considered view that the new Act, has progressive clauses and once operationalised will enhance the development of the insurance industry in Zambia. Some of the progressive clauses in the Act include the regulation and supervision of Microinsurance. This means that we will now be able to have a third category of insurance known as Microinsurance aside from General Insurance and LongTerm Insurance. This will help the insurance industry contribute to the attainment of objectives in the National Financial Inclusion Policy. 

The Act also has enabling provisions to enhance consumer protection and service delivery. The Act also caters for the creation of a new solvency/capital adequacy framework that will respond to the level of risks that insurers and reinsurers carry to enable them build more resilience.  The promulgation of marine cargo insurance that has been topical issue in the last couple of years, has also been provided in the Act. 

Ladies and Gentlemen;

It must be noted that according to Section 15 of the Interpretation and General Provisions Act, Chapter 2 of the Laws of Zambia, where any Act is repealed, any statutory instrument issued under or made pursuant to the repealed Act shall remain in force, in so far as it is not inconsistent with the new law until it is repealed by a statutory instrument issued under a new law. Therefore, all statutory instruments issued pursuant to the Insurance Act No. 27 of 1997, including the Insurance (Fidelity Fund) Regulations, 2021, will continue in force despite the repeal of the Insurance Act No. 27 of 1997, until such a time that they are repealed by subsequent statutory instruments.

In conclusion, I am confident that the measures being put in place by the Government and the Authority will continue facilitating the growth of the pensions and insurance industries. 

Once again, the Authority looks forward to collaborating with industry and the media in developing the pensions and insurance industries.

Thank you so much for your attention.