The Sunday Mail
THE commission of inquiry appointed by Government last year to look into the potential prejudice suffered by pensioners and policyholders through the conversion of values from the Zimbabwean dollar to the United States dollar is facing dogged resistance from companies that are reluctant to submit crucial data.The resistance is feeding into suspicions that some companies deliberately took advantage of the currency transition to short-change vulnerable pensioners and policyholders through token payouts.
However, the commission, led by retired High Court judge Justice George Smith, is now cracking the whip and subpoenaing insurance companies, pension funds, brokers and fund administrators that fail to submit information necessary to discharge its mandate as outlined in Statutory Instrument 80 of 2015.
It has been established that executives and chairpersons of non-complying institutions were summoned between July 27, 2016 and August 3, 2016 in terms of Section 11 of the Commissions of Inquiry Act.
Some of the companies that have been summoned include Old Mutual, First Mutual, Comarton and Marsh.
After the changeover from the local currency to the multi-currency system in February 2009, contributors to life assurance and pension schemes queried the new “discounted” values of their contributions and measly payouts.
The growing disaffection towards pension funds and insurance companies prompted President Mugabe to issue a Proclamation in SI80 of 2015 establishing an eight-member commission of inquiry.
The commission’s mandate is to establish if there was prejudice in converting Zimbabwe dollar-originated pension and insurance contracts to ones based in US dollars.
It will also assess if funds were administered in line with the principles and practices of pension and insurance service provision.
Furthermore, the commission is mandated to determine whether or not the regulation and governance of pension and insurance services measures up to established standards.
It is envisaged that restorative justice will be achieved through compensating aggrieved parties, especially vulnerable pensioners who lost their life savings.
Missing information
There is a belief that the various excuses given by companies for failure to produce the required data are tell-tale signs that something is not right in the industry.
The Sunday Mail Business established last week that in addition to the public hearings that were carried out in Zimbabwe’s 10 provinces between December 2015 and May this year, the commission has developed other methods to determine restitution.
However, crucial data that insurance companies and other service providers are reluctant to provide is the missing link.
None of the excuses from the companies have been accepted by the commission.
Commission chair Justice Smith said: “Competent record keeping is a critical process in the success of any pension and insurance service provision.
“In the wake of data submissions by insurance companies, in response to the commission’s requests, the commission can see significant room for improvement in recording keeping practices by insurance companies in the provision of pension and insurance service provision. Our conclusions in this regard will be more specific in our final report.”
Some of the key information sought by the commission to establish the total value of pension funds as of December 31, 2016 as compared to March 31, 2009, includes the nature, type and value of pension fund assets.
Controversial conversions
The conversion of pension fund liabilities has been a contentious issue since 2009 as calculations depended mainly on valuations made during the hyperinflationary era.
Various professional bodies such as the Actuarial Society of Zimbabwe and the Zimbabwe Association of Pension Funds have been seized with the issue.
During the changeover period, some brokers roped in private valuators – mostly actuaries – to determine the valuations.
In some cases, valuators simply took the members share of assets in the Zimbabwe dollar era at the conversion date and determined that proportionate share in US dollars.
But pension fund valuation is a statutory requirement whose valuation procedure is guided by principles that must be strictly adhered to.
This is the reason why valuators are usually considered to be liable and culpable for any principle that will be wrongly applied during the valuation process.
There is also suspicion that valuators might end up picking up the tab in cases where victims prejudiced during the conversion period have to be compensated.
Concern has mainly been raised in cases where a different method that is used to determine the valuation of the amount due to policyholders and pensioners produces a totally different value.
Experts content this is the reason there is need for a single methodology to make valuations consistent.
“It is prudent that insurance associations like Zimbabwe Actuarial Society, Zimbabwe Association of Pension Funds, Institute of Insurance in Zimbabwe and universities meet and discuss this thorny issue which is affecting the entire industry.
“This will help standardise operations, restoring confidence in the insurance industry,” said Mr Robson Mtangadura in a paper for Zimbabwe Actuarial Consultants, a local company providing actuarial consultancy services.
Most challenges have been experienced by long-term insurance companies which saw most policies being reduced to zero value after the transition.
Though some companies have rewarded contributors with paid-up policies, some have been struggling to honour their obligations especially for defined contribution fund since their capacity was also affected by the transition.
A defined contribution fund is where the amount payable to a pensioner on retirement is based on the amount of money in a members pension account at the time of retirement.
Even in cases where valuations are difficult to determine, ex-gratia payouts – paid out of moral rather than legal considerations – are not considered to be ideal.
Probe extension
It is in light of these multiple challenges in the sector that President Mugabe appointed an eight-member commission on August 19, 2015.
Assisting Justice Smith are Dr Godfrey Kanyenze, Mr Anesu Daka, Mr Martin Tarusenga, Mr Brains Muchemwa, Mr Itai Chirume, Mrs Violet Mutandwa and Mr George Dikinya.
While the probe was supposed to be completed within nine months, there are indications it might be extended due to the sheer scope of works.
The commission will have to sift through information from no less than 1 000 pension funds, including information from companies in the insurance and life assurance sector.
