Basic HTML Version
99
www.ebizguides.com
Finance
The insurance sector consists of insurers, re-insurers,
brokers, assessors, adjustors and policyholders. In
1970 the Government of Zambia formed the monopoly
Zambia State Insurance Corporation (ZSIC) in order to
provide low cost insurance to indigenous Zambians.
This state of affairs existed until the liberalization of the
industry in 1992.
The Insurance Act of 1997 is the principal piece of
legislation governing the supervision and regulation of
the insurance industry. As an insurance supervisor, the
Pensions and Insurance Authority (PIA) is tasked with
maintaining an efficient, fair, safe and stable insurance
market for the benefit and protection of policyholders.
A number of local insurers have since emerged and
competition has increased. However, the market is still
relatively small. The ZSIC currently has the broadest
distribution network, covering all nine provincial cen-
tres and some critical districts. The corporation has
launched an aggressive marketing drive to promote its
agricultural products in rural areas.
The Insurance Act was amended in 2005 under the
FSDP to include:
• Compulsory local shareholding in insur
ance companies
• Exhaustion of local capacity prior to carry
ing out reinsurance
• Fostering investment of insurance funds
in Zambia
• Revisiting insolvency requirements and
investment guidelines
Madison Asset Management Company Limited (MAM-
co) is a newly established investment management
company licensed by the Securities and Exchange
Commission to provide investment advisory and fund
management services. MAMco is a fully owned sub-
sidiary of Madison Financial Services Company Limited
(MFSL), which is a respected financial services group in
Zambia. MAMco owns and operates Madison General
Insurance Company Zambia Limited and Madison Life
Insurance Company Zambia Limited, both of which are
100 percent subsidiaries of the LSAGroup.
Established in 1993 and opened on 21 February 1994,
The Lusaka Stock Exchange (LuSE) has played a key
role in fostering the economic transformation of the
country. The formation of the LuSE was part of the
Zambian government’s economic reform programme
THE INSURANCE SECTOR
THE LUSAKA STOCK EXCHANGE
to develop the financial and capital markets in order to
support and enhance private sector initiatives.
The LuSE is made up of corporate stock broking mem-
bers and is incorporated as a non-profit limited com-
pany. Currently the member brokers are Stockbrokers
Zambia Limited, Intermarket Securities Limited and
Pangaea (Renaissance Capital)/EMI Securities. Com-
panies listed on the exchange currently range from
those of the banking, retail trading, oil marketing, and
manufacturing sectors to those of property, agricultural
processing, hospitality and investment.
The exchange has been set up as a modern stock ex-
change based on the most current international stand-
ards and practices. These include use of a central de-
pository system, trade for trade clearing and settlement
process, rolling settlement three days after trade date
(T+3), and meeting G30 recommendations for clearing
and settlement system design and operation. The Lu-
saka Stock Exchange’s automated trading systemwent
live in November 2008 and has since been relatively
well received.
The LuSE has a unified market, of both bonds and equi-
ties. From its inception the exchange offered trading in
equity securities and in March 1998 became the official
market for trading in government bonds.
Trading activities at the Lusaka Stock Exchange (LuSE)
during 2009 reflected the effects of the global financial
crisis. Like many global equity markets, the LuSE’s all-
share index recorded a decline, particularly during the
first four months of the year. However, the index had
recovered from a low of 2 096.7 inApril 2009 to close at
2 807.3 at end-September 2009. Market capitalization,
which had fallen to K18 583.4 billion in April, recovered
to K22 651.0 billion by end-September 2009.
A common technical interconnectivity platform present-
ly being developed will allow investors to trade stocks
across securities exchanges in the Southern African
Development Community (SADC). This presents fur-
ther growth and exposure of LuSE in the future.
Investment incentives
Several measures have been put in place to ensure
investor confidence and protection within the LuSE.
The market is regulated by the 1993 Securities Act and
enforced by the Securities and Exchange Commission.
The act is specifically designed to ensure adequate in-
vestor protection and support the operation of a free,
orderly, fair, secure and properly informed securities
market. There is also a compensation fund established
under the act, designed to compensate persons who