Ethiopian Insurance companies allotted a combined investment capital of 660 million Birr to form an Ethiopian-owned reinsurance company, according to The Reporter.

Insurance providers also signed an agreement with Diligence Consultancy Service PLC to undertake the organizational setup and other studies for six months.

National Bank of Ethiopia (NBE) issued a Reinsurance Company Establishment Directive (No.SBB/1/2014) last year which permits the formation of national reinsurance companies in Ethiopia.

The Association of Ethiopian Insurers (AEI) is the first to make a move towards forming a reinsurance firm.
I3 members of the association and other four non-members insurance companies have subscribed 660 million Birr of the paid up capital. As a result of the restrictions in the directive, each insurance company has subscribed below 50 million Birr, Kiros Jiranie, president of AEI and CEO of African Insurance SC said on Wednesday, May 6, 2015.

The directive restricts the shareholders of a reinsurance company to hold more than five percent of the subscribed capital. Nonetheless, it exempts the federal government of Ethiopia and public enterprises fully owned by the state, thus can hold more than five percent of the subscribed capital.

In order to cover the cost of formation of the company, shareholders are expected to pay one percent of their subscription. “Thus, one percent of the 200 million birr subscription is now reserved for the day to day activities of establishing the company,” he said.

The objective of establishing a national reinsurance company is to enhance financial resource mobilization and minimizing costs related to cross border reinsurance transactions. It also intends at raising underwriting capacity and solvency of direct insurers by extending technical assistance and cover accumulated and catastrophic losses.

Source: The Reporter