INSURANCE turnover is projected to reach 1.5tri/- this year on the back of strategies laid down including creation of trust accounts.
The insurance turnover last year, according to Tanzania Insurance Regulatory Authority (TIRA), grew by 25 per cent to 1.146tri/- in comparison to the previous year.
The Ministry of Finance Deputy Permanent Secretary, Mr Lawrence Mafuru, said the creation and management of proper insurance trust account set to uplift the sector further while driving away liquidity challenges that insurers face in handling trust money.
“Let me congratulate CRDB Bank for being the first bank to join TIRA in the establishment of an insurance trust account,” Mr Mafuru said yesterday when opening training for chief financial officers from insurance firms:
“But I am impressed by the way you have seen the importance of preparing this training which aims to build awareness among insurance companies on the operation of the said account.”
The Treasury Deputy PS said the establishment of the trust account was a good step that will help strengthen the management of the insurance sector to comply with the legal and regulatory requirements set by TIRA introduced in 2009.
He said the previous procedure faced several challenges, which led TIRA to fail to properly manage the trust money when they were returned to companies from the Bank of Tanzania (BoT) after maturity.
Thus, several insurance firms diverted the trust money to other uses without obtaining the approval of TIRA, thus leading to a liquidity challenge, and sometimes failing to pay compensation to Insurance holders due to lack of funds.
“The decision to open an insurance trust account in commercial banks is the answer to the challenge, as now TIRA will be able to directly manage the funds, leading to the development of the insurance sector,” he said.
Additionally, Mr Mafuru asked TIRA to ensure that all insurance companies follow the law by opening a trust account to align the sector with the 10-year ‘Financial Sector Development Master Plan.
Speaking at the workshop, Commissioner of the Insurance Dr Baghayo Saqware said according to the Insurance Regulation of 2009 insurance companies should keep security deposits of at least 50 per cent of the minimum capital of the respective insurance company.
“The system will not only improve management but also is friendly and brings more transparency to insurance firms. Companies will be able to get information on securities in time, and make investments according to the agreement with TIRA,” added Dr Saqware.
The commissioner said that last year the TIRA in collaboration with the Association of Tanzania Insurers (ATI) agreed to prepare guidelines for strengthening liquidity management leading to the establishment of trust account through commercial banks to overcome the problem of capital challenges or failure to pay insurance compensation.
The CRDB Managing Director Mr Abdulmajid Nsekela thanked TIRA for the opportunity to participate in the establishment of the trust account.
He said the decision to establish the account plays an important role in promoting more transparency and accountability in the insurance sector, and will also help build confidence among stakeholders.
“Considering that these [trust] funds have also been used for corporate investment, our bank is fully organised in providing investment advice and assistance,” said Mr Nsekela.
CRDB Bank has considered one hundred per cent of the recommendations of TIRA and insurance industry stakeholders. The account is linked to digital systems that will help in the management and provision of information to the TIRA and insurance companies.
