• Zimbabwe has a low insurance penetration rate of 2.6%
  • Potential impact of El Niño and the need to strengethen the insurance sector in the country
  • The GPW surged by 263%, rising from ZW$7.49 billion to ZW$27.21 billion in Q1'23

Harare - In a challenging and uncertain business environment, it is crucial for both formal and informal businesses to prioritize short-term insurance. This not only helps manage risks but also stimulates investment. Currently, Zimbabwe has a low insurance penetration rate of 2.6%, indicating that a significant portion of the population and economic entities lack insurance coverage. Considering Zimbabwe's unique risks, such as natural disasters, political instability, and economic volatility, it becomes vital for listed or registered companies to reconsider their insurance policies. Having comprehensive insurance coverage for property damage, business interruption, liability claims, and unforeseen events provides peace of mind to investors and encourages them to invest in the country.

The agricultural and mining sectors, which are crucial to the economy, are particularly susceptible to the impact of phenomena like El Niño. Hedging against unforeseen occurrences through short-term insurance can help these sectors become more resilient to disasters. Insurance coverage for property, crops, and infrastructure plays a significant role in disaster preparedness and recovery efforts. By reducing the burden on public resources and facilitating faster recovery, insurance enables communities and governments to rebuild and recover more effectively.

While there is ongoing debate about the exact size of the informal economy in Zimbabwe, it is certain that it accounts for over 60% of the economy. The informal sector faces various risks, including business interruptions, property damage, accidents, theft, and health emergencies. Insurance coverage can enhance the credibility and financial stability of individuals and businesses in the informal sector. It also plays a crucial role in accessing loans or financing from banks and financial institutions, as insurance provides reassurance to lenders and facilitates easier access to credit on favorable terms. Nigeria has successfully implemented credit lines for its informal sector, serving as an example for Zimbabwean stakeholders to collaborate with the sector.

Recent incidents, such as the fire at the Glen View Area 8 Home Industry Complex in Harare and the destruction of property at Mutize Flea Market in Bulawayo, highlight the vulnerability of businesses in the absence of insurance coverage. In light of these events, it is important to review the performance of short-term insurers in the first quarter of the year.

During the quarter ended 31 March 2023, the total combined Gross Premium Written (GPW) of short-term insurers experienced a remarkable increase. In inflation-adjusted terms, the GPW surged by 263%, rising from ZW$7.49 billion to ZW$27.21 billion. In nominal terms, the increase was even more substantial, reaching 582%, with the GPW climbing from ZW$7.49 billion in March 2022 to ZW$51.05 billion in the corresponding period of 2023.

Foreign-currency denominated business also witnessed growth, expanding by 52%. The reported figure rose from US$24.49 million during the three-month period ending on 31 March 2022 to US$37.32 million in the comparative period of 2023. Meanwhile, short-term insurers wrote ZW$18.01 billion in gross premiums during the first quarter of 2023, representing 35% of the total business written. The remaining 65% of the total business was written in foreign currency.

The substantial increase in combined business written between March 2017 and 2023 can be attributed to premium reviews undertaken by insurers. These reviews aimed to align with inflation developments and address the volatility of exchange rates.


As above, the real increase in the combined GPW during the quarter ending March 2023 was 263%. Except for the hail line of business, all other lines of business experienced positive real growth. The table below will show the breakdown of Combined GPW by line of business.


According to graph above, motor and fire insurance remained dominant as the primary sources of business for short-term insurers during the quarter ending March 2023. Together, they contributed 71% of the Combined Gross Premium Written (GPW), marking an increase from the 69% recorded in the comparative period of 2022. While motor insurance retains its significance as a mandatory class of insurance, it is crucial for all stakeholders to collaborate and address existing issues that undermine confidence in the insurance industry. This includes raising awareness about insurance as a risk management tool rather than solely a cost-driver for businesses.

During the quarter ending March 2023, short-term insurers wrote a total of ZW$18.01 billion in gross premiums, accounting for 35% of the total business written. The remaining 65% of business was written in foreign currency. The Gross Premium Written in foreign currency saw a 52% increase from US$24.49 million in the comparative period of 2022 to US$37.32 million, contributing 65% of the total business written by short-term underwriters. Motor and fire insurance were the main sources of foreign currency denominated business, jointly contributing 65% of the total business for the period.

As of 31 March 2023, all twenty short-term insurers reported capital positions exceeding the minimum capital requirement of ZW$37.5 million. Total assets for these insurers experienced a significant increase of 483%, rising from ZW$28.62 billion as of 31 March 2022 to ZW$166.89 billion as of 31 March 2023. Investment property represented the largest portion of total assets at 21%. However, there was a concerning 437% increase in premium debtors, reaching ZW$29.48 billion from ZW$5.49 billion. This ongoing rise in premium debtors remains a credit risk management concern that necessitates immediate attention from insurers.



Investment property and premium debtors emerged as the two significant asset classes, collectively accounting for 39% of total assets in the short-term insurance industry. Investment property alone constituted 21%, exceeding the limit of 10% set by Circular 2 of 2013. Additionally, premium debtors and other assets contributed 18% and 12% respectively, surpassing the limits of 5%. These violations of the prescribed limits indicate a need for short-term insurers to structure their investment portfolios in a manner that not only preserves policyholder value but also promotes a balanced investment mix aligned with the investment limits and asset/liability profiles defined by the Insurance and Pensions Commission (IPEC).

The industry's average retention ratio decreased from 62.15% to 57.50%, indicating a decline in the average risk appetite among direct short-term insurers. Retention ratios for individual insurers during the period varied widely, ranging from 2.66% to 99.84%. The dominance of mandatory motor insurance and a lack of innovation have led to insurers predominantly writing motor insurance and retaining 100% of their book due to statutory limits on Third Party motor insurance liabilities.

Technical liabilities for short-term insurers experienced a substantial increase of 523%, rising from ZW$6.59 billion to ZW$41.04 billion. The average liquid assets to technical reserves ratio rose from 63% in March 2022 to 101% in the comparative period of 2023, indicating a more cautious approach in setting aside liquid assets to cover unexpected claims. Technical assets in the short-term insurance sector surged by 845%, reaching ZW$18.81 billion as of 31 March 2023, compared to ZW$1.99 billion as of 31 March 2022. However, the technical assets were ZW$22.23 billion lower than the technical liabilities, which can be attributed to Third Party Insurance being the primary source of business for short-term insurers. Typically, insurers do not make reinsurance arrangements for third-party motor insurance due to the low statutory limits on claims. The highest proportion of technical liabilities was accounted for by gross outstanding claims. The industry is encouraged to improve claims settlement patterns to reduce outstanding liabilities and enhance financial stability.


Short-term insurers reported a total profit after tax of ZW$11.53 billion for the three-month period ending 31 March 2023, representing a nominal increase of 290% compared to the ZW$2.96 billion reported during the same period in 2022. The combined ratio, a measure of profitability, significantly improved to 88% as of 31 March 2023, compared to 105% reported in the previous year. Short-term insurers achieved an underwriting profit of ZW$376.27 million, contrasting with an underwriting loss of ZW$674.36 million in the comparative period of 2022. However, rising operational and claims-related costs remain a concern, with eight out of twenty insurers reporting underwriting losses during the reporting period in 2023.


The average net commission ratio decreased to 1.8% during the period under review, down from 11.98% in the comparative period of 2022. This decrease reflects the corrective measures implemented by the Insurance and Pensions Commission (IPEC) to align commission rates in accordance with Circular 2 of 2009. The industry's average return on assets (ROA) and return on equity (ROE) stood at 14% and 28% respectively for the period, compared to 21% and 40% respectively for the quarter ending 31 March 2022. The decline in ROA indicates that the industry is not effectively utilizing its investment assets to maximize profitability.

Liquid assets in the form of cash and money market instruments witnessed a substantial increase of 633%, rising from ZW$2.63 billion as of 31 March 2022 to ZW$19.27 billion as of 31 March 2023. However, eight out of the twenty short-term insurers reported negative working capital ratios, and the industry's acid test ratio averaged 37.4% as of 31 March 2023. This low ratio raises concerns about short-term insurers' liquidity risk, indicating a limited capacity to meet short-term financial obligations. The acid test ratio for insurers as of 31 March 2023 ranged from 3% to 506%, highlighting significant disparities among companies.