In addition, the industry itself has failed to co-operate to enable it handle mega risks and stop the externalisation of insurance funds. Unlike the Bankers Association of Zambia (BAZ), whose existence and strength is cemented by the banks themselves, the insurance industry has a very loose arrangement about how it should promote a common front. There is neither a written nor binding memorandum of understanding among the insurance companies to foster cooperation on some of the thorny issues confronting the insurance industry today! However, I must acknowledge here, that there is an organisation called the Insurers Association of Zambia (IAZ), whose membership is compulsory but which may not be very strong in guiding its membership. BIS Review 74/2004  1  Ladies and Gentlemen, from my observation, the insurance and pension industry in Zambia is facing many challenges. These include: 1)  Amendments to the Insurance Act of 1997 and the Pension Schemes Regulation Act of 1996 so that laws and regulations that impose stricter corporate governance practices and structures in all institutions managing pension and insurance funds are introduced;  2)  The Investment Act must be harmonised with the Insurance/Pensions Acts in such a way that all insurance companies formed or already formed must have local ownership/equity partnership. This would greatly contribute to minimising capital flight and huge repatriation of dividends;  3)  Need for the establishment of a national re-insurance company to avoid capital flight;  4)  Insurance companies need to harmonise their operations so that clients benefit from fair competition.
A crisis was narrowly averted when the counterparties were persuaded to purchase LTCM. I might say that in due course they got their money back: which only goes to show that a liquidity crisis can arise even when the solvency position of the institution remains positive. Thirdly, we cannot ignore the threat of a “Major Operational Disruption” (MOD). What I mean by this is a natural disaster, a major act of terrorism like 9/11, or an IT catastrophe such as we sought to mitigate in the Y2K preparations. Considerable time has been devoted to work in this area, on ex ante mitigants to provide predictability and help to enable the system to get back to work quickly. You need robust back-up sites, operating procedures, personnel regrouping plans and so much more. We are not on our own of course if a financial crisis does occur. Clearly we would work closely with FSA and the Treasury both directly and through the Tripartite Standing Committee. The Standing Committee of representatives of the Bank, FSA and Treasury meets on a monthly basis and of course ad hoc. We discuss both individual cases of significance and specific threats which could be relevant to financial stability. The Committee covers surveillance, strengthening the infrastructure and crisis management. For the latter, the objectives and roles of each party are outlined on the Financial Sector Continuity Website. The Bank’s roles relate to ensuring the orderly functioning of the UK markets, including the maintenance of adequate liquidity and the functioning of payment systems.