Zambia’s Insurance Sector Struggles Under 2021 Act

The Zambian insurance sector has faced significant challenges in recent years, largely attributed to the Insurance Act of 2021, which came into force in December 2022. Economic expert Kelvin Chisanga has raised concerns that while the Act was meant to align the sector with international standards, it has, in practice, made the cost of doing business in the industry considerably higher. 

The new insurance law has introduced a series of regulatory hurdles, such as the need for compliance with International Financial Reporting Standards (IFRS), increased solvency requirements, and capital adequacy norms. For insurers, particularly small and medium-sized businesses, these requirements have led to substantial operational costs. Mr. Chisanga notes that these increased expenses are being passed on to consumers, further raising insurance premiums for the average Zambian.

A major concern within the industry is the restriction on foreign shareholding, which has made Zambia’s insurance sector less attractive to foreign investors. This has also limited access to foreign capital, which could help lower the cost of doing business and provide greater financial stability. As a result, small Zambian companies are left with fewer resources to expand and improve their operations.

Mr. Chisanga further points out that the introduction of mandatory actuary appointments for each company has added to these challenges. Actuarial services, which are essential for risk management and compliance with new solvency regulations, are expensive and often beyond the reach of smaller insurers. The costs associated with hiring actuaries, along with the increased reporting requirements, have disproportionately affected smaller players in the sector.  

The increased cost of compliance has widened the gap between large and small insurance companies. While large corporations are able to negotiate better deals and absorb some of the compliance costs, small and medium enterprises (SMEs) are struggling to keep up. As a result, many smaller firms are forced to raise their premiums, making insurance coverage less affordable for Zambians.

In addition, the regulatory burdens imposed by the Pensions and Insurance Authority (PIA) have created a bureaucratic environment that hinders the industry’s growth. Mr. Chisanga believes that the PIA should focus on promoting development and enabling growth, rather than playing a policing role. The current approach, which emphasizes enforcement of compliance through penalties and high supervision costs, is stifling the sector’s potential.

The increased licensing fees, which have risen by over 400% across all categories since the enactment of the Act, have further exacerbated the cost of doing business. Many smaller companies are now struggling to cover both regulatory fees and operational costs, leaving them in a precarious financial position. The limited pool of skilled professionals, particularly in senior management roles, has also driven up wages and recruitment costs, adding to the financial burden on insurers. 

Mr. Chisanga argues that the Insurance Act of 2021 should be revisited to encourage balanced growth within the sector. He notes that President Hakainde Hichilema has repeatedly emphasized the need to reduce the cost of doing business in Zambia, yet the current framework has done the opposite for the insurance industry. 

The restrictions on foreign investment, increased operational costs, and complex compliance requirements have combined to create an environment where doing business has become more difficult, especially for small and medium-sized firms.

Mr. Chisanga advocates for reforms that would simplify compliance and regulatory requirements without compromising the industry’s stability. He suggests that measures such as cash-before-cover provisions, reduced foreign shareholding restrictions, and streamlined solvency regulations could help lower costs for both insurers and consumers. 

The expert also supports the establishment of an insurance tribunal to address disputes, reduce regulatory burdens, and promote a more balanced and competitive market. 

Despite the current challenges, Mr. Chisanga remains optimistic that with the right reforms, the Zambian insurance sector can recover and thrive. He believes that aligning regulatory frameworks with the country’s broader economic goals—such as attracting foreign investment, promoting private-sector growth, and reducing the cost of doing business—will ultimately benefit both the industry and the wider public.