The proposed Policyholder Protection Fund for the insurance and pension industry is a welcome development as it will help assure policyholders that they will receive compensation due to them upon the occurrence of an insured event, the Insurance and Pensions Commission (IPEC) has said.

The insurance and pension industry regulator said given the critical role played by insurance in the growth of the economy, it is critical that the market is stable against any market shocks or failure.

IPEC’s remarks come as Treasury plans to establish a Policyholder Protection Fund (PPF), administered by an Independent Board of Trustees meant to create a pool of resources similar to the Deposit Protection Fund.

Membership is mandatory by law for all deposit-taking institutions registered under the Banking Act (Chapter 24:20), Building Societies Act (Chapter 24:02), People’s Own Savings Bank (POSB) Act (Chapter 24:22), Infrastructure Development Bank of Zimbabwe (IDBZ) Act (Chapter 24:14) and Micro-finance Act (Chapter 24:29).

The deposit protection scheme for banks contributes to financial stability and prevent bank runs if depositors have confidence that they will have access to their funds quickly when a bank fails. The fund will be modelled along the same fashion.

In his 2019 National Budget Statement, Finance and Economic Development Minister Professor Mthuli Ncube, said the PPF is meant to protect clients in the insurance and pension industry.

“In order to create a pool of resources similar to the Deposit Protection Fund, a Policy Holder Protection Fund is being established and administered by an Independent Board of Trustees.

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