IMF Staff Country Reports

This technical note discusses Botswana’s stress testing and systemic risk analysis for insurers and retirement funds. Insurers are resilient in the adverse scenario, but vulnerabilities exist with regard to concentrated exposures to domestic banks. Retirement funds in Botswana are designed as defined contribution schemes, thereby effectively passing on investment risks to scheme members. The adverse scenario has a sizable impact on members with only few years to retirement, reducing future pension values by more than 15 percent compared to the baseline. The new Retirement Fund Act, adopted in 2022, is very likely to influence the liquidity of retirement funds, calling for a robust liquidity management. The risk analysis highlights the need for Non-Bank Financial Institutions Regulatory Authority to substantially improve its data analytics and resources. The Financial Sector Assessment Program recommends a review of supervisory reporting templates, more robust processes to ensure complete and consistent reporting, and the implementation of a data management system, which allows for horizontal and financial stability analysis. Further, authorities should conduct regular stress test of large insurers and retirement funds, and analyze risks stemming from concentrated bank exposures.