Banking & Micro-finance Law

Insurance Business  (Amendment) Proclamation No. 1163-2019

PROCLAMATION No. 1163/2019

A PROCLAMATION TO AMEND INSURANCE BUSINESS PROCLAMATION

WHEREAS, it has become necessary to amend the Insurance Business Proclamation No.746/2012;

NOW, THEEFORE, in accordance with Article 55 (1) of the Constitution of the Federal Democratic

Republic  of  Ethiopia,  it  is  hereby  proclaimed  as follows:

  1. Short Title

This  Proclamation  may  by  cited  as  “Insurance Business  (Amendment)       Proclamation     No. 1163/2019.”

  1. Amendment

The       Insurance       Business       Proclamation No.746/2012 is hereby amended as follows.

1/  Sub  Article  (8)  and  (12)  of  Article  2  of   the Proclamation are deleted and replaced by the following new Sub Articles  (8) and  (12):

8/  “company”  means  a  share  company  as defined  under  the  Commercial  Code,  the capital   of   which   is   owned   fully   by Ethiopian nationals or foreign nationals of Ethiopian   origin or   jointly   owned   by Ethiopian  nationals  and  foreign  nationals of   Ethiopian   origin,  or    organizations owned   fully  by  Ethiopian   nationals  or foreign  nationals  of  Ethiopian origin  or jointly owned by Ethiopian nationals and foreign nationals of Ethiopian origin,

 

12/ ‘‘financial      institution”      means      an insurance  company,  a  bank,  a  micro

finance   institution,   a   capital   goods finance  company,  a  reinsurer,  a  micro insurance

provider,    postal    savings, money     transfer     institution,     digital financial service

provider  or such other institution    as     determined     by    the National Bank;”

2/  The following  new Sub-Articles (38, 39, 40,

41,  42,  43,  44,  45,  and  46)  are   added  after Sub   Article   (37)   of   Article   2   of

the Proclamation,   and      the   subsequent   Sub- Articles (38) to   (40) are renumbered as

Sub Articles (47) to (49), respectively:

 

38/ “digital financial service” means financial services including payments, remittances and

insurance   accessed   and   delivered through digital channels;”

39/  “takaful”  means  a  cooperation  between members of a community whereby each member    undertakes    to    contribute    a certain  sum  of  money  to  a  fund  which will   be   used

mutually   to   assist   the members   against   a   defined   loss   or damage;

40/  “foreign  national  of  Ethiopian  origin” means  a  foreign  national  of  Ethiopian origin

as defined under Proclamation No. 270/2002 Providing Foreign Nationals of Ethiopian Origin with Certain Rights   to be Exercised in their Country of Origin;”

41/   “insurance company” means a company licensed    by    the    National    Bank    to undertake insurance    business    or    an insurance    company    owned    by    the Government;”

42/  “micro  insurance”  means  any  form  of protection  against  risks  that  is  designed for

and accessed by low-income people, provided    by    different    categories    of carriers but

operating on basic principles of insurance and funded by premiums;”

43/  “micro insurance agent” means a person licensed by the National Bank as a micro insurance  agent  who,  acts  for  and  on behalf  of  one  or  more  micro  insurance providers,  and  engages  in  intermediary services;”

44/  “micro    insurance    providers”    means insurers,   including   those   dedicated   to deal  in   micro   insurance   business  and microfinance institutions;”

 

45/  “premium” means the amount of money an    insurer    charges    to    provide    the coverage   described    in    an    insurance policy;”

46/  ‘‘margin  of solvency” means the excess of     admitted     assets     over     admitted

liabilities to be maintained for each main class of insurance business;”

3/  The following new Sub Article (10)  is added after   Sub  Article  (9)  of  Article   5  of

the Proclamation;

10/  “The    National    Bank    may    issue    a directive    prescribing   the    manner    of

licensing      and      supervising      micro insurance  provider  and  micro  insurance agent.”

4  /  Article  10   of   the  Proclamation   is  deleted and replaced by the following new article

10:

10/  Manner   of   participation   of   a   Foreign National   of   Ethiopian   Origin   in   an

Insurance Business Without   Prejudice   to   the   prohibition   laid down under   Sub Article (5) of Article 16 of the proclamation,

1) “A foreign national of Ethiopian origin or an  organization  owned  fully  by  foreign nationals

of Ethiopian origin or jointly by foreign  nationals  of  Ethiopian  origin  and Ethiopian

nationals are allowed to acquire the shares of Ethiopian insurer or to open an insurance company;

2) If  a  foreign  national  of  Ethiopian  origin holds  a  share  directly  in  an  insurance

company or indirectly by holding a share in another organization that holds a share in  an  insurance  company,  in  accordance with  the

provisions  of  Sub-Article  (1)  of this    Article,    a    foreign    national    of Ethiopian

origin  or  the  organization  to which  he  is  a  shareholder,  shall  pay  the values   of   the

shares   in   an   insurance company  only  in  an  acceptable  foreign currency;

3)  Notwithstanding  the  provisions  of  Sub- Article  (2)  of  this  Article,  all  types  of

payments  due  to  a  foreign   national  of Ethiopian origin resulting from;

  1. a) dividends earned  from  a  share  in  an insurance company;
  2. b) transfer of   shares   in   an   insurance company;
  3. c) sales or  liquidation  of  an  insurance company; or

 

  1. d) any other     matters     related     to shareholding      in      an      insurance

company; shall be paid to him in a local currency, i.e. Birr; meanwhile, he may not be   allowed to

repatriate  any  asset  or  interest  obtained  in this manner.

 

4)  The  National  Bank  may  issue  directive related    to    additional    conditions    for

investment  in  an  insurance  company  by foreign nationals of Ethiopian origin.”

 

5/ Sub  Article   (5)    of Article  12   of   the Proclamation  is repealed.

6/ Paragraph (c) of Sub Article (4) of Article 15  of  the  Proclamation  is  deleted    and

replaced by new paragraph (c);

  1. c) “the duties   and   responsibilities   of board  of  directors  and  manner  of corporate

governance      of      an insurance company;”

7/  Sub  Article  (3)    of  Article  16  of    the Proclamation is deleted   and replaced by the

following  new  Sub  Article  (3)   and new  Sub  Article  (5)  is  added  after   sub Article (4):

3) “A director of an insurer  may not, at  the same time,  serve as a director of another financial institution. Moreover, a business entity   or   a   company   in   which   such director  has  ten  percent  and  more  equity interest may not serve as a director of an insurer.”

 

5) “Foreign   nationals   or   organizations fully  or  partially  owned  by  foreign nationals

may   not   be   allowed   to open an insurance company or carry on   insurance   business   or   operate branch   offices   or   subsidiaries   of foreign    insurers    in    Ethiopia    or

acquire   the   shares   of   Ethiopian insurers.”

8/ Sub  Article  (1)     of  Article  26  of  the Proclamation is repealed.

9/ Sub Article     of    (1)   Article 30 of  the Proclamation is repealed.

10  Sub  Article  (1)    of  Article  46  of  the Proclamation is deleted and replaced by the

following new Sub-Article (1):

1/ “Unless     otherwise     provided     by regulations     or     directives     issued pursuant

to   this   Proclamation,   no insurer    may    grant    any    loan    or financial

guarantee,          except employment  benefits  allowed  to  all employees  of  an  insurer  or

loans  on life   policies   issued   by  him   within their surrender value, to any director,

shareholder,  chief  executive  officer, auditor,  actuary  or  to  any  insurance auxiliary   or

to   any   other   person connected with such persons.”

 

11/ The  following new Articles (55, 56, 57,

58, 59, 60) are added after  Article 54 of the  Proclamation  and     the  subsequent Articles  55   to    60  are  renumbered  as Articles  61  to  66, respectively .

  1. Supervision of A Reinsurer

1/ The National Bank shall supervise a reinsurer.

2/ The    National    Bank    shall    issue directive  necessary  to  supervise  a reinsurer.

3/  All   Articles  of  this  Proclamation are applicable to a reinsurer licensed under    the

Proclamation    except Articles  6  (2-5),  27  (3), 34  (2),  39-

45, 48-50, 58 and 59 (as amended).

 

  1. Digital Insurance Services

Minimum     conditions     to     provide digital   insurance   services   shall   be determined

by    a    National    Bank directive.

  1. Regulation of Advertisement

The  National  Bank  may  at  any  time direct an insurer to withdraw, amend or refrain  from  issuing  a  paid  radio  or television   announcement,   a   poster   , billboard,  brochure,

circular,  or  other document,  and  a  paid  advertisement  in a   regularly   published

newspaper   or magazine  that  it  considers  to  be  false, misleading, deceptive, or offensive.

 

  1. Determining Insurance Premium

The  National  Bank  may  determine  an economic (minimum) premium rate in a manner to be specified by a directive.

 

  1. Insurance Services Consumer Protection

The National Bank may issue directive for protecting    the    right    and    interest    of

insurance service consumers.

 

  1. Licensing and Supervision of A Takaful Insurance Company

1/   Without   prejudice   to   the   requirements specified   under   the   provisions   of   the

Proclamation  and  directive  the  National Bank  shall  issue  directive  to  prescribe additional conditions for the licensing and supervision    of    a     takaful     insurance company.

2/  without  prejudice  to  Sub-Article  (1)  of  this Article,    the    National    Bank    may

issue directive    to    regulate    takaful    insurance carried     on     alongside     a

conventional insurance business.

  1. Effective Date

This Proclamation shall come into force on the date of publication in the Federal Negarit Gazette.

 

Done at Addis Ababa, this 9th day of January  2020

SAHLEWORK ZEWDIE

 

PRESIDENT OF THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA

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