Amendments Introduced by Insurance Business (Amendment) Proclamation No. 1163-2019

The Insurance Business (Amendment) Proclamation No. 1163/2019 was issued to amend the existing Insurance Business Proclamation No. 746/2012. It came into force on January 9, 2020, the date of its publication in the Federal Negarit Gazette.

The amendments introduced by Proclamation No. 1163/2019 include:

• Amendments to Article 2 (Definitions):
  • Sub-Articles (8) and (12) were deleted and replaced.
    • The new Sub-Article (8) defines “company” as a share company whose capital is fully owned by Ethiopian nationals or foreign nationals of Ethiopian origin, or jointly by them, or by organizations fully owned by them, and which is registered under Ethiopian law with its head office in Ethiopia.
    • The new Sub-Article (12) defines “financial institution” to include an insurance company, bank, microfinance institution, capital goods finance company, reinsurer, micro insurance provider, postal savings, money transfer institution, digital financial service provider, or any other institution determined by the National Bank.
  • Nine new Sub-Articles (38 to 46) were added after Sub-Article (37) of Article 2, and the subsequent Sub-Articles (38) to (40) were renumbered as (47) to (49). The new definitions are:
    • “digital financial service” means financial services, including payments, remittances, and insurance, accessed and delivered through digital channels.
    • “takaful” means a cooperation between community members where each contributes money to a fund for mutual assistance against defined loss or damage.
    • “foreign national of Ethiopian origin” carries the definition provided under Proclamation No. 270/2002.
    • “insurance company” refers to a company licensed by the National Bank to undertake insurance business or an insurance company owned by the Government.
    • “micro insurance” means a form of risk protection designed for and accessed by low-income people, operating on basic insurance principles and funded by premiums.
    • “micro insurance agent” is a person licensed by the National Bank to act for one or more micro insurance providers and engage in intermediary services.
    • “micro insurance providers” include insurers (even those dedicated solely to micro insurance business) and microfinance institutions.
    • “premium” is the amount an insurer charges for the coverage described in an insurance policy.
    • “margin of solvency” is the required excess of admitted assets over admitted liabilities for each main class of insurance business.
• Amendment to Article 5:
  • A new Sub-Article (10) was added after Sub-Article (9). This allows the National Bank to issue a directive prescribing the manner of licensing and supervising micro insurance providers and micro insurance agents.
• Amendment to Article 10 (Manner of participation of a Foreign National of Ethiopian Origin in an Insurance Business):
  • This Article was deleted and replaced entirely. The new provisions include:
    • A foreign national of Ethiopian origin or an organization fully or jointly owned by foreign nationals of Ethiopian origin is permitted to acquire shares in an Ethiopian insurer or to open an insurance company.
    • If a foreign national of Ethiopian origin holds shares (directly or indirectly) in an insurance company, the value of these shares must be paid only in an acceptable foreign currency.
    • Any payments due to a foreign national of Ethiopian origin resulting from dividends, share transfers, company sales or liquidation, or other shareholding matters, shall be paid in local currency (Birr), and the repatriation of any asset or interest obtained in this manner is not allowed.
    • The National Bank may issue a directive regarding additional conditions for investment in an insurance company by foreign nationals of Ethiopian origin.
• Amendment to Article 12:
  • Sub-Article (5) was repealed.
• Amendment to Article 15:
  • Paragraph (c) of Sub-Article (4) was deleted and replaced. The new paragraph (c) refers to “the duties and responsibilities of the board of directors and the manner of corporate governance of an insurance company.”
• Amendment to Article 16:
  • Sub-Article (3) was deleted and replaced. The new Sub-Article (3) stipulates that a director of an insurer cannot simultaneously serve as a director of another financial institution. Furthermore, a business entity or company in which such a director holds 10% or more equity interest cannot serve as a director of an insurer.
  • A new Sub-Article (5) was added after Sub-Article (4). This new Sub-Article (5) states that foreign nationals or organizations fully or partially owned by foreign nationals are not allowed to open an insurance company, carry on insurance business, operate branch offices or subsidiaries of foreign insurers in Ethiopia, or acquire shares of Ethiopian insurers.
• Amendment to Article 26:
  • Sub-Article (1) was repealed.
• Amendment to Article 30:
  • Sub-Article (1) was repealed.
• Amendment to Article 46:
  • Sub-Article (1) was deleted and replaced. The new Sub-Article (1) prohibits an insurer from granting any loan or financial guarantee to any director, shareholder, chief executive officer, auditor, actuary, insurance auxiliary, or any connected person, except for employment benefits allowed to all employees or loans on life policies issued by the insurer within their surrender value.
• Addition of new Articles 55, 56, 57, 58, 59, and 60:
  • These new articles were added after Article 54, with subsequent Articles 55 to 60 being renumbered as 61 to 66.
    • Article 55: Supervision of a Reinsurer: The National Bank shall supervise a reinsurer and issue necessary directives for this purpose. Most provisions of the Proclamation are applicable to a reinsurer, with certain exceptions.
    • Article 56: Digital Insurance Services: The National Bank shall determine minimum conditions for providing digital insurance services through a directive.
    • Article 57: Regulation of Advertisement: The National Bank may direct an insurer to withdraw, amend, or refrain from issuing advertisements (radio/television, poster, billboard, brochure, circular, newspaper, or magazine) if deemed false, misleading, deceptive, or offensive.
    • Article 58: Determining Insurance Premium: The National Bank may determine an economic (minimum) premium rate in a manner to be specified by a directive.
    • Article 59: Insurance Services Consumer Protection: The National Bank may issue a directive for protecting the rights and interests of insurance service consumers.
    • Article 60: Licensing and Supervision of a Takaful Insurance Company: The National Bank shall issue directives prescribing additional conditions for the licensing and supervision of a takaful insurance company. It may also issue directives to regulate takaful insurance carried on alongside conventional insurance business.