Amendment to Manner and Criteria of Transacting Reinsurance Directive No. SIB/53/2020

NATIONAL BANK OF ETHIOPIA

LICENSING AND SUPERVISION OF INSURANCE BUSINESS

Amendment to Manner and Criteria of Transacting Reinsurance Directive No. SIB/53/2020

Whereas, reinsurance is an important risk management tool that can be used to reduce insurance risk and the volatility of financial results, stabilize solvency, make more efficient use of capital, better withstand catastrophic events, increase underwriting capacity, and draw on reinsurance companies’ expertise;

Whereas, reinsurance exposes an insurance company to other risks including counter-party, operational, legal, liquidity, and the combination of these risks can make reinsurance complex and challenging to implement effectively;

Whereas, inadequate reinsurance risk management practices and procedures can materially affect an insurance company’s financial soundness and reputation, and can ultimately contribute to its failure;

Whereas, reinsurance policy, program, procedures and practices should be guided, among other things, by the objective of optimizing premium retention but without compromising ah insurance company’s financial soundness and reputation;

Now, therefore, in accordance with Article 54 of Insurance Business Proclamation No. 746/2012 and Article 64(2) of Insurance Business Proclamation No. 746/2012 as amended by the Insurance Business (Amendment) Proclamation No.1163/2019, the National Bank of Ethiopia hereby issues this Directive.

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