Reinsurance Directive Maintains Government Control

The National Bank of Ethiopia (NBE) will receive applications for the formation of reinsurance companies from May 8, 2014.

This is following the issuance of the Reinsurance Company Establishment Directive, announced on Thursday April 3, 2014, at a press conference at the Central Bank.

The reinsurance companies will be formed as share companies, wholly owned by Ethiopian nationals and organisations. No shareholder, other than the federal government of Ethiopia or enterprises fully owned by it, shall have more than a five percent share. The capital of the company will be at least 500 million Br, which ought to be fully paid up in cash and deposited in a blocked bank account.

“The existence of national reinsurance companies simplifies treaty negotiations, settlement of claims and payment of ceded premium in domestic currency within the shortest possible time,” says Temesgen Zeleke, Insurance Supervision Directorate director at the Bank, while briefing journalists about the directive on Thursday, April 3, 2013, in the premises of the NBE’s headquarters, near the National Theatre on Gambia Street.

The creation of these companies will improve the risk-taking capacity of insurance companies and simplify reinsurance negotiations, according to Temesgen.

The directive was issued due to the economic growth of the country and the increasing demand for insurance coverage.

Zafu Eyesuswork, founder of United Insurance S.C., Welcomed the directive, but complained about the implication that the government could have unlimited shares.

“It means the government still wants to maintain significant control,” he said. .

Ethiopian insurance companies mainly rely on Munich Re and Kenya Re for reinsurance, he said, and the practice costs the country foreign currency.

The Ethiopian Insurance Company uses Africa Re, Munich Re and Swiss Re for reinsurance, according to its website. Inward reinsurance has also brought the corporation “additional income, amounting to Birr 33.6 million Gross Written Premium in the year 2012/2013,” the site states.

“With much bigger projects, like the Grand Ethiopian Renaissance Dam (GERD) underway, Ethiopia is in need of reinsurance companies,” Temesgen said.

The insurance industry had an aggregate capital of 1.8 billion Br in the 2012/13 fiscal year – an increase of 600 million Br from the preceding year. In paid-up capital, too, there has been a welcome change in the industry.  Although previously a paid-up capital of only seven million Birr (four million Birr for general and three million Birr for life) was required, this has been raised to 75 million Br (60 million Br and 15 million Br, for general and life, respectively).


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