Two sector second quarter reports the Insurance and Pensions Commission (Ipec) has published so far and high on the list of threats to the insurance industry is Compliance Risk.
By Donald T. Chidoori
Compliance is about ensuring that a company follows the regulatory and legal standards and procedures and maintains security. However, most players in the insurance industry are failing to adhere to compliance issues, which exposes them to legal penalties, financial forfeiture and material loss.
None compliance within the insurance industry is prevalent in the following areas;
– Late submission of quarterly returns.
– Late submission of audited financial statements
– Non-compliance with prescribed asset ratios
– Non-compliance with minimum capital requirements
– Late payment of levies.
– Non-compliance with the minimum solvency margin
- 5 major risks confronting the Funeral Assurance industry in Zimbabwe
- Poor corporate compliance practices can destabilise national economy
On top of that poor corporate compliance management practices at financial institutions can arguably destabilise the entire national financial systems supporting the economy.
The 2008 Global Credit Crisis is a good example of the fact that poor corporate compliance can destabilise entire economies. The United States of America faced an economic crisis in 2008 that spiralled to the whole world, even though the Sarbanes Oxley Act of 2002, was in existence for almost 6 years.
In 2013 Ipec suspended AON Zimbabwe for failing to comply with Section 3 of Statutory Instrument 243 of 2006, Section 35 of the Insurance Act [Chapter 24:07], and Section 3 of Statutory Instrument 243 of 2006. In 2015 short term reinsurers KMFS and Global insurance and reinsurer, New Reinsurance Company were suspended by the regulator from underwriting new business due to failure to meet minimum capital requirements.
Since 2010 Ipec has deregistered about 135 companies for failing to raise the statutory minimum capital, unethical business conduct and failure to pay claims running into millions of dollars.
In the wake of these deregistration and continued listing of compliance risk as a major threat to the operation of insurance companies, it is clear that the industry needs competent governance, risk and compliance (GRC) professionals.
Most Regulatory Authorities in Zimbabwe like the Reserve Bank of Zimbabwe, the Insurance and Pensions Commission, have codified the need for Boards of corporate entities to ensure that institutions implement effective compliance frameworks and processes. The regulatory authorities are thus demanding that the role of compliance be increasingly recognised as critical.
If insurance companies are to act in accordance with industry laws and regulations, internal policies or prescribed best practices, what they clearly need is someone to make sure internal processes are being carried out properly. The question however is, how will insurers know if this someone is competent enough? … Enter the Compliance Society of Zimbabwe (CoSoZ).
The CoSoZ, is a standard setting body which promotes international best practice in the interests of developing the minimum tenants of enterprise governance, regulatory compliance, corporate ethics and financial crime compliance.
Here are five top-reasons why joining the CoSoZ is worth the time, cost and effort of insurers in Zimbabwe.
- Acts as Watchdog – Ipec has warned that it is not afraid to take action against firms that fail to comply with set rules and regulations. CoSoZ acts as watchdog for the well being of the insurance industry in Zimbabwe. How does it do this … CoSoZ ensures that all certified compliance officers are not only given a public voice but ensures that they work within the confines of the profession to ensure that the industry avoids crippling fines, loss of trust and reputational damage.
- Learning best practices– According to Ipec, Ignorance of best practices in compliance management have posed a serious business and reputational risk to the insurance industry in the country. The CoSoZ provides a platform for promulgating industry-wide best practices, and becoming a member of CoSoZ gives insurers resource to learn what best practices govern your chosen field. It can also give you a head start on compliance if best practices are amended or change.
- Professionalism – CoSoZ promotes the professional status, image and credibility of its members to ensure professionalism and alignment and response to international best practice. In addition CoSoZ certified compliance officers are equipped with the necessary skills, to ensure that proper policies and controls are in place to reduce risk, to set up a system of checks and balances to alert personnel when new risks materialize and to manage business processes more efficiently and proactively.
- Continuous Professional Development (CPD) – CoSoZ provides education, continuous professional development (CPD) and training for compliance officers. Continuing education and professional development is key for any insurance professional dealing with compliance issues. CoSoZ provides professional development opportunities in the form of workshops, seminars, and classes, they also provide the opportunity to learn from other members. The peer-to-peer learning and potential mentorship opportunities that CoSoZ provides will allow members to pool their knowledge and take advantage of each other’s experiences.
- Networking– This one is fairly obvious. In the great race to the top who you know matters, and CoSoZ is filled with potential contacts. CoSoZ gives members a chance to connect and create relationships, making them fabulous networking opportunities for those who want to strengthen ties with clients or colleagues, hunt for jobs, or make long-term beneficial connections. The Society also harnesses new ideas and classic advice on Compliance Management Systems from its members, regulators and other global compliance management systems experts which helps professionals to be adept with compliance issues in the country and the world over.
All kinds of job roles require or benefit from a CoSoZ membership, including occupational health and safety, environment, IT, Cyber security professionals. The goal of CoSoZ, in general, is to Create a platform for defining and informing the Compliance Agenda in Zimbabwe across sectors and industries.