Central bank of Ethiopia issues a trio of directives to regulate insurance sector.
Addis Ababa, Ethiopia –Ã‚Â The National Bank of Ethiopia (NBE) has issued a long-awaited directive aimed at increasing the minimum paid-up capital required to establish an insurance company to 75 million Br. This is a 971pc increase from the previous seven million Br paid-up capital requirement.
The Directive, circulated to all insurance companies on Thursday, April 11, 2013, will come into effect on April 15, 2013. Signed by Teklewold Atnafu, governor of the Central Bank the new directive increased the minimum paid-up capital required to provide general and long term insurance to 60 million Br and 15 million Br, respectively.
An insurance company, which provides general insurance services, was previously required to mobilise four million birr, while three million birr was needed to provide long term insurance services. Insurance companies in operation, or under formation, that have a paid-up capital below the new requirement have been given until December 31, 2015 to comply, according to the directive.
This is one of the three directives that the central bank issued on the same date last week, all of which focused on the regulation of the insurance industry. The second directive sets a 36 month time limit for the reduction or relinquishing of shares, in excess of five percent, and the third provides a scheme for information exchange by insurers on outstanding premiums.
According to the third directive issued by the NBE, customers that have not paid outstanding premiums up until December 2014, will be considered defaulters and will be denied coverage at all insurance companies.
In addition, insurance companies are required to submit a list of debtors who owe more than 10,000 Br in unpaid premiums to the Association of Ethiopian Insurers (AEI), in order to develop a database and keep a 100pc provision on unpaid debts once the deadline passes.
The NBE issued the three directives in order to implement the Licensing and Supervision of Insurance Business Proclamation, ratified by the House of PeopleÃ¢â‚¬â„¢s Representatives in August 2012. The ratified proclamation repealed its predecessor, which had governed the insurance sector since 1994. Read more