General Authority for Financial Supervision Board Decision No. 19 of 2014 Concerning Insurance and Reinsurance Companies Contracting to Manage Reserved Funds Investment Portfolios

The Official Gazette - Issue 51 on March 4, 2014

General Authority for Financial Supervision General Authority for Financial Supervision Board Decision No. 19 of 2014 Concerning Insurance and Reinsurance Companies Contracting to Manage Reserved Funds Investment Portfolios

The Board of Directors of the General Authority for Financial Supervision Having reviewed Law No. 10 of 2009 regulating supervision over non-banking financial markets and instruments: And Law No. 10 of 1981 on supervision and regulation of insurance, and its Executive Regulations: And Law No. 95 of 1992 on the capital market, and its Executive Regulations: And the Statute of the General Authority for Financial Supervision issued by Presidential Decree No. 192 of 2009: And the positions of the Authority's Board of Directors in its meeting held on February 9, 2014:

Has decided:

Article (1) An insurance or reinsurance company may entrust the management of a portion of its reserved funds investment portfolio to one of the companies licensed by the General Authority for Financial Supervision to conduct securities portfolio formation and management activities, investment fund management activities, or both (hereinafter referred to in this Decision as the "Investment Manager"), in accordance with the provisions of this Decision.

Article (2) The reserved funds investment portfolio whose management may be entrusted may be invested in cash deposits, bank savings certificates, government securities, bonds, sukuk, investment fund instruments, and their shares, provided that the Portfolio Manager shall ensure that investments comply with the rules and regulations stipulated in Article (40) of Law No. 10 of 1981 on supervision and regulation of insurance, and Article (28) of its Executive Regulations. In all cases, the investment officer at the insurance or reinsurance company shall maintain compliance with the rules and regulations stipulated in Article (28) of the Executive Regulations regarding the total reserved funds investment portfolio of the company, whether fully or partially entrusted to an investment manager, as stated in Article (1).

Article (3) The following conditions shall apply to contracting with one of the reserved funds investment portfolio management companies:

1. The licensed company must have practiced the activity for at least three full years, and the average value of the portfolios it managed in the previous year must not be less than 200 million Egyptian pounds.
2. The value of the portfolio entrusted to the investment manager must not exceed 30% of the total value of portfolios managed by that manager.
3. The contracting shall be contingent upon the continuous availability of the conditions stipulated in items (1 and 2) at all times.
4. The value of the investment portfolio managed by a single investment manager must not exceed 50% of the total value of reserved funds investments of the insurance or reinsurance company.
5. The insurance or reinsurance company shall submit the contract concluded with the investment manager, as well as any renewal or change of the investment manager, to the company's Board of Directors for approval.
6. The insurance or reinsurance company shall provide the Authority with a certificate from the portfolio management director confirming compliance with the provisions of Article (37) of the Executive Regulations of Law No. 10 of 1981, and shall commit to immediately notifying the Authority in the event of a decision to liquidate the total portfolio value, while providing a certificate from the investment manager that the total portfolio value will not be liquidated without obtaining written approval from the Authority.
7. The insurance or reinsurance company shall provide the Authority at the end of each quarterly financial period with the reserved funds allocated to the investment portfolio.

Article (4) The insurance or reinsurance company shall ensure that the reserved funds investment portfolio management contract includes the following:

1. The conditions stipulated in Article (3), items (1, 2, 3, 4, 6).
2. Designation of the responsible portfolio management director at the contracted company.
3. The portfolio management investment policy, including approximate allocation percentages for each financial instrument and concentration limits.
4. The contracted company's commitment to comply with the investment regulations stipulated in Article (40) of Law No. 10 of 1981 on supervision and regulation of insurance, and Article (28) of its Executive Regulations, and to monitor compliance monthly by its internal auditor.
5. The contents of reports related to portfolio investments and performance that the management company is committed to providing, and the frequency of such reports.
6. The contracted company's policy regarding conflict of interest avoidance.
7. Commitment to deposit the investment portfolio, with its components referred to in Article (2) of this Decision, with one of the banks in Egypt licensed by the Authority to conduct portfolio trustee activities.

Article (5) The insurance or reinsurance company's contract to entrust the management of reserved funds investment portfolios shall not take effect until its Board of Directors approves the contract. The minutes of the Board meeting where the contracting is approved must include evidence that a copy of the draft contract, the track record of the targeted investment manager, the experience of its investment management team, the latest audited financial statements of the investment manager company, the size of the portfolios it manages, and compliance with all conditions stipulated in this Decision were presented.

Article (6) The insurance or reinsurance company shall submit to the Authority, within one week of concluding the contract with the portfolio manager, a copy of the contract and a copy of the Board of Directors minutes containing the approval of such contracting.

Article (7) This Decision shall be published in the Official Gazette and on the Authority's website, and shall take effect from the day following its publication in the Official Gazette. It shall be communicated to the relevant departments and concerned companies for implementation.

Chairman of the Board Sherif Samy