THE economy needs long-term financing to unlock critical investments and the insurance sector could play a key role in bridging this gap, Finance and Economic Development Minister, Professor Mthuli Ncube, has said.
Officially opening the recent Organisation of Eastern and Southern Africa Insurers (OESAI) regulators and CEOs forum in Victoria Falls, Prof Ncube said insurers and reinsurers must play their role as providers of economic safety nets.
The sector, he added, should help stabilise the economy, especially during times of a financial crisis by offering protection on economic interdependence among businesses and insuring the supply chains.
The minister, who addressed virtually, said the insurance industry should take its place in the economic transformation of Zimbabwe through mobilisation of long-term savings and financing capital projects.
“Our vision is to become an upper middle-income society by 2030. This can only be achieved if there is an economic structural transformation that will result in the economy transitioning from an agro-based economy to a service-driven economy anchored by tourism, finance and insurance and information technology,” he said.
“I highly commend insurers, as you are the infrastructure builders. By mobilising long-term savings, the industry oils the capital markets and provides stability to the economy.
“However, in the region we have lagged behind in the development of an efficient bond market, which central and local governments can utilise to mobilise funds for infrastructure projects.”
Despite the capacity for the insurance sector to develop the economy, Prof Ncube said, there was a gap as no one was providing “patient” capital. He challenged regulators and industry players to come up win-win solutions on this issue so that the sector stretches itself to make meaningful impact in the development of economies.
The minister said the insurance sector has a big value chain that anchors the economies of many upper-middle income societies by offering risk transfer and risk analysis services that enable innovators to have financial safety net to pioneer new ways of doing things.
The industry has residual contribution as it provides direct employment provision, income taxes and premium taxes to Governments making it the engine for growth of many economies, he said.
Covid-19 has, however, changed the face of business and also triggered growth in information and communications technology and healthcare services. Prof Ncube said the industry can leverage growth, adding the need for sustainable regulation that not only promotes industry vibrancy but also enhances policyholder protection, promotes soundness and reduces systemic risk of the financial sector.
Although the outlook for the insurance industry post-Covid-19 looks bright, the minister emphasised the need to curb emerging cyber insurance threats, which calls for investment in data protection for individuals and businesses.
“Insurers can cover the costs associated with cybersecurity issues, which can include reputational risk, loss of business, loss of customers, cyber extortion and bullying among others,” said Prof Ncube.
“E-commerce by nature stimulates production and consumption, which in turn drives economic growth and efficiency.”— Herald