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Ethiopian Insurance Business Proclamation Makes Changes to the Industry

Ethiopia’s newly ratified ‘Insurance Business’ proclamation has made several changes to how the industry operates. The new proclamation prohibits insurance companies from providing policy coverage on credit according to a notification issued by the national bank in a circular signed by Temesgen Zeleke, Director of the Insurance Division Directorate at NBE.

The particular change will require immediate action by the insurance companies according to a contract administration manger for an insurance company.

The National bank is requiring insurance companies to collect outstanding credit and to prepare policies on a cash basis alone going forward said Temesgen.

The no credit rule will be beneficial to both the insurance companies and the central bank as it eliminates the need for exerting effort and committing resources towards collecting outstanding money while the central bank will receive the full due its owed in such exchanges said according to Meseret Bezabih, General Manger of United Insurance.

The proclamation lowers the cap placed on the maximum number of shares a single share holder, his/her spouse or children under 21 can own decreasing the percentage from 20% to 5%.

Shareholders possessing a 2% or more stake in an insurance company are designated influential  share holders and cannot buy shares in other insurance companies.

The proclamation also allows the central bank to change the paid-up capital requirements for the sector through enacting a directive.

Source: Addis Fortune