The Insurance Business Proclamation No. 746/2012, which was issued on 22^nd of August 2012 is amended by Proclamation No. 1163/2019, which came into effect as of 9^th of January 2020, is attached here under. The salient features included into this amendment are the following:

1. The provisions that used to prohibit foreign nationals of Ethiopian origin not to own shares of insurance companies are deleted. As per the new amendment the shares of insurance company can be fully held by Ethiopian nationals or foreign nationals of Ethiopian origin or jointly owned by Ethiopian nationals and foreign nationals of Ethiopian origin, or by organizations fully owned by Ethiopian nationals or foreign nationals of Ethiopian origin or jointly owned by Ethiopian nationals and foreign nationals of Ethiopian origin. Yet, foreign nationals of Ethiopian origin are required to pay the values of shares in insurance companies only in acceptable foreign currencies. However, the dividends or the proceeds from the transfer, the sale of the shares or the proceeds of the liquidation of the insurance company will be paid in Birr and such shareholder is not allowed to repatriate any asset or interest obtained due to its participation as shareholder of insurance companies. The amendment has defined foreign nationals of Ethiopian origin as person who is endowed with certain rights to be exercised in Ethiopia as detailed out under Proclamation No. 270/2002.

2. It should be noted that the amendment has explicitly prohibited foreign nationals or organization fully or partially owned by foreign nationals not to open an insurance company or carry on insurance business or operate branch offices or subsidiaries of foreign insurers in Ethiopia or acquires the shares of Ethiopian insurance companies.

3. The amendment has also empowered the National Bank of Ethiopia to issue directive that prescribes the manner of participation of foreign nationals of Ethiopian origin in the insurance business.

4. The amendment has allowed insurance companies to undertake digital insurance services and micro insurance as per the terms and conditions of the directives to be issued by the National Bank of Ethiopia. As per the amendment, digital financial service includes "payments, remittances and insurance accessed and delivered through digital channels". On the other hand, micro insurance includes "any form of protection against risks that is designed for and accessed by low-income people, provided by different categories of carriers but operation on basic principles of insurance funded premiums".

5. Similarly, micro insurance agents [a person who is licensed by the National Bank of Ethiopia as a micro-finance agent and who acts for and on behalf of one or more micro insurance provides and who can engage in intermediary services] can participate in insurance business as an agent where such a person meets the requirements as set out by the National Bank of Ethiopia. Micro insurance provides are insurers, including those dedicated to deal in micro insurance business and microfinance institutions.

6. The National Bank of Ethiopia is empowered to supervise reinsurance business and the Bank is also allowed to issue directives to this effect. The amendment states that most of the provisions of the Insurance Business Proclamation No. 746/2012 (as amended by Proclamation No. 1163/2019), will be applicable to regulate the reinsurance business.  

7. The amendment has allowed takaful insurance companies to operate in Ethiopia as long as they fulfill the requirements as set out in the Insurance Business Proclamation 746/2012 (as amended by Proclamation No. 1163/2019) and the directives to be issued by the National Bank of Ethiopia. Takaful is defined by the amendment as "a cooperation between members of a community whereby each member undertakes to contribute a certain money to a fund which will be used mutually to assist the members against a defined loss or damage".

8. As per the amendment a director of an insurance company is not allowed to serve, at the same time, as a director of another financial institution. In addition, a business entity or a company in which such director has 10% (ten percent) and more equity cannot serve as a director of an insurance company. The amendment has defined financial institutions as an insurance company, a bank, a microfinance institution, a capital goods finance company, a reinsurer, a microfinance provider, postal savings, money transfer institutions, digital finance service provider or such other institutions as determined by the National Bank of Ethiopia.

9. As per this amendment insurance companies are not allowed "to grant any loan or issue any financial guarantee except those relates to employment benefits that are allowed to all employees of an insurer or loans on life policies issued by him within the surrender value, to any director, shareholder, chief executive director, auditor, actuary or to any insurance auxiliary or to any other person connected with such persons. However, regulation or directive can be issued, which allows the granting of loans or financial guarantees by insurance companies".        

10. The amendment has given the National Bank of Ethiopia the mandate of determining by its directives the minimum (economic) premium rate. The amendment has defined premium as "an amount of money an insurer charges to provide the coverage described in an insurance policy".

11. The National Bank of Ethiopia is also empowered to issue directives that are aimed at protecting the rights and interest of insurance service consumers.

12. The National Bank of Ethiopia is also mandated to direct advertisements by insurance companies. To this effect the Bank can at any time direct insurance companies to withdraw, amend or refrain from issuing a paid radio or television announcement, a poster, billboard, brochure, circular or other document, and a paid advertisement in regularly published newspaper or magazine that it considers to be false, misleading, deceptive, or offensive.   

Published on April 15^th 2020

Attachments:

File	Description	File size
insurance-business-proclamation-1163-2019.pdf		3105 kB