Bond Notes will not have an impact on insurance premiums


Ever since the introduction of bond notes and the subsequent inflation and the selling of United States dollars on the black market people have been worried that like in 2008, they risk the loss of their premiums and investments in life policies and pensions.

By Donald Chidoori

In 2009 after conversion, thousands of people lost their pensions and life policies, as the economy went south and the Zimbabwean currency lost value.

In 2008 the economy was imploding and the Zimbabwean currency was disappearing. The main sector that suffered most was the financial sector. And because the financial sector deals with financial assets which are hinged on the currency, as the currency lost value, all financial assets were lost. This resulted in pensions and the life policies being wiped out.

The introduction of bond notes has stirred fears that the economy will spiral back to the 2008 era and that people will once again lose their investments in pensions and insurance policies. This has increased scepticism on the need to buy insurance policies as thousands of people have resorted to stocking cash in their homes and limiting investments in financial services like insurance.

Speaking to journalists at an Insurance Journalist mentoring programme Mr Luke Ngwerume, the Managing Director of an online insurance aggregator, assured members of the public that the bond notes would not have an impact on insurance premiums and that members of the public should not fear for their investments in pensions funds or insurance policies as long as the government stuck to their word and used the bond notes as stated and as long as the bond notes continued to be underpinned by some credible asset.

“If we have a local currency based on nothing then we will be in for another fright. However, if they (Government) stick to their word and use it and actually underpin it with some credible asset whether it’s a credit line from a multi-lateral institution or something else, if they stick to that and its controlled then actually it won’t have an impact on your (insurance) values because it will continue to relate on a one to one basis,” cautioned the General Manager of the insurance aggregating platform.

While assuring the public that all things being equal their pensions and insurance were safe, Mr Ngwerume equally warned members of the public that, the economy still remained a major threat to insurance companies. And that the selling of the US dollar on the black market for the exchange of bond notes on a rate different from the stipulated one is to one value was a threat to the viability of the economy.

“But of cause in these scheme of things Zimbabweans are a strange lot and one hears of stories that there is actually some premium on bond notes which is now implied. But I think for as long as the supply of that note is restricted to actual underlying assets in real terms then we do not face the risk of sliding back into the 2008 era,” he warned.

Mr Ngwerume went on to advise the government not to misuse the bond notes like what happened in the Hyperinflationary environment when the government over printed money. Currently the bond notes have been accepted by members of the public and the business community.

“But if somebody got excited and they say well these things have been accepted we might as well print as many of them as possible then all hell will break loose, and we will go back to 2008,” warned Mr Ngwerume.

And if we were to spiral back to 2008 what would insurance companies do.

“If they learnt anything from 2008, they (insurance companies) will stop accepting risk in a funny currency otherwise we will run into similar problems again.”

In 2008 insurance companies resorted to reviewing sums insured fortnightly just for them to be able to ensure that in the event of a loss a client is properly indemnified.

“This time, we all hope we have learnt enough and we won’t go back to 2008,” stressed Mr Ngwerume.

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