The year 2020 started off with most insurers experiencing pressure on their real earnings as a result of net monetary losses incurred due to the change of functional currency from the United States Dollar (“USD”) to the Zimbabwean Dollar (“ZWL”), effected by Statutory Instrument 149 of 2019. The instrument stated the ZWL as the sole currency for legal tender and consequently insurers had to price their policies in local currency. To make matters more difficult, consumer confidence was also adversely affected due to the loss in value that policyholders experienced during the previous currency transition in Zimbabwe in 2008/9.

The Zimbabwean insurance industry was also affected by the global outbreak of the COVID-19 pandemic which led to unprecedented disruption and created material uncertainty. The successive lockdowns first introduced on 30 March 2020 as well as other restrictions to manage the spread of the virus had a far-reaching negative impact on the level of aggregate demand and economic activity within the country. The erosion of disposable income across the economy coupled with uncertainty over the ability of the sector to cover claims against the impact of the pandemic have resulted in a low appetite for insurance products.

Restrictions on movement and adoption of working from home also resulted in decreased underwriting volumes and a slowdown in collection of premiums across the industry. The underwriting business is mainly carried out through physical interaction in Zimbabwe so new business was limited. Retail consumer demand for insurance slid because of low disposable income, exacerbated by the severely affected informal sector that accounts for a significant segment of the economy.