A commission of inquiry was set up in Zimbabwe in 2015 to investigate the process of converting the value of pensions and life assurance benefits following the dollarisation of the Zimbabwean economy in 2009.
Though the commission is yet to conclude on its findings, it is generally agreed that the whole conversion process could have been more transparent, through consultative engagement of the key interested parties. The commission is scrutinising the role played by the key market participants, with some focus on actuarial professionals and the various unconventional valuation approaches.
The conversion process was mired with a plethora of challenges for actuaries. First, there was an acute shortage of actuaries, with only two practising in Zimbabwe. There was also difficulty in setting assumptions owing to the instability of key macro-economic fundamentals, including prior hyperinflation, and very few funds to benchmark accrued benefits at rates commensurate with the underlying inflation rate. In some cases, this led to the unintended transfer of fund assets from older generations to both younger generations and shareholders.
The conversion process has been a steep learning curve for the actuarial profession, as well as the insurance industry at large in Zimbabwe. When the Actuarial Society of Zimbabwe (ASZ) was re-launched in 2010 to represent actuarial interest in Zimbabwe, its tag-line was 'Doing things right'. This emphasises the need to firm up on professionalism and have a collective approach to confront the industry's problems.
Chief actuary of African Actuarial Consultants and president of the ASZ 17 February