Insurance laws Ethiopia
In Ethiopia, the insurance sector is regulated by the National Bank of Ethiopia (NBE). The primary legal framework governing the industry is the Insurance Business Proclamation No. 746/2012, which has been subsequently amended, most notably by Proclamation No. 1163/2019. These laws and the directives issued by the NBE are aimed at ensuring the stability, soundness, and growth of the insurance sector.
Key Aspects of Insurance Law in Ethiopia:
1. Regulatory Body and Legal Framework:
National Bank of Ethiopia (NBE): The NBE is the central supervisory body for the insurance industry. It is responsible for licensing, renewing licenses, and enforcing regulations on insurance companies, reinsurers, and insurance auxiliaries (agents, brokers, loss assessors, etc.).
Proclamations: The main laws are the Insurance Business Proclamation No. 746/2012 and its subsequent amendments. These proclamations address everything from the establishment of insurance companies to their operations and governance.
2. Licensing and Company Requirements:
Company Structure: Insurance businesses in Ethiopia must be structured as share companies.
Minimum Paid-Up Capital: The NBE sets specific minimum paid-up capital requirements for insurance companies. As of a recent directive, the minimum paid-up capital is:
General Insurance: Birr 400 million
Long-Term (Life) Insurance: Birr 100 million
Both General and Long-Term: Birr 500 million
Ownership: The law previously restricted ownership of insurance companies to Ethiopian nationals and organizations wholly owned by Ethiopians. This has been subject to amendment and is a key area of policy change.
Licensing and Renewal: To get a license, a company must meet a range of requirements, including submitting a business plan, having a board of directors that meets NBE standards, and having the required capital. Licenses must be renewed annually.
Non-Admitted Insurance: The Ethiopian insurance market is generally a "closed market," meaning that non-admitted insurance is prohibited. This means that risks located in Ethiopia must be insured by companies licensed within the country.
3. Types of Insurance and Key Provisions:
Mandatory Insurance:
Motor Third-Party Liability: This is a compulsory type of insurance for all vehicles in Ethiopia.
Professional Indemnity Insurance: This is mandatory for insurance intermediaries, such as agents and brokers.
Employee's Insurance: Employers are legally required to provide insurance for work-related injuries or diseases.
Health Insurance: The Ethiopian Health Insurance Agency is an autonomous federal body that implements health insurance in the country. It oversees two main systems:
Community-Based Health Insurance (CBHI): For the informal sector.
Social Health Insurance (SHI): For the formal sector.
Composite Insurance: Ethiopian law permits composite insurance, which allows a single company to offer both life and general insurance products.
4. Consumer Protection and Market Conduct:
Fraud Monitoring: The NBE has directives in place for monitoring and addressing fraud in the insurance and reinsurance businesses.
Corporate Governance: The NBE issues specific directives on corporate governance for insurers to ensure prudent business practices, accountability, and the protection of policyholders and other stakeholders. A key principle is that the interests of policyholders take precedence over those of shareholders.
Deposit Insurance: The Ethiopian Deposit Insurance Fund (EDIF), while separate from the insurance sector, is a crucial part of the financial safety net. It provides insurance for depositors in the event of a bank or microfinance institution failure, but this does not cover insurance policies themselves.
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