Regulatory Alerts2014-01-01
General Financial Regulatory Authority Board Resolution No. (19) of 2014 on Insurance and Reinsurance Companies Contracting for Managing Dedicated Investment Portfolios
The General Financial Regulatory Authority (GFRA) issued Resolution No. 19 of 2014, updated in 2023, to govern how Egyptian insurance and reinsurance companies outsource the management of their dedicated investment portfolios to licensed portfolio managers. The resolution establishes strict eligibility criteria for managers, including minimum three-to-five years of operation and asset thresholds, while capping entrusted portfolio values at 30% of the manager's total assets and 50% of the insurer's dedicated funds. It further mandates comprehensive contractual terms, quarterly financial reporting, internal audit verification, and explicit board approvals to ensure strict compliance with Egypt's insurance supervision laws.
Resolution of the Board of Directors of the General Financial Regulatory Authority No. (19) of 2014 Regarding Insurance and Reinsurance Companies Contracting for the Management of Dedicated Investment Portfolios by Securities Portfolio Management Companies or Investment Funds Last amended on: 2023-1-18
Board of Directors of the General Financial Regulatory Authority, Having reviewed Law No. 10 of 2009 on regulating supervision over non-banking financial markets and instruments; Having reviewed the Supervision and Regulation of Insurance Law issued under Law No. 10 of 1981 and its Executive Regulations; Having reviewed the Capital Market Law issued under Law No. 95 of 1992 and its Executive Regulations; Having reviewed the Basic System of the General Financial Regulatory Authority issued by Presidential Decree No. 192 of 2009; And having approved the resolution by the Authority's Board of Directors in its session held on 9/2/2014; Has resolved:
Article (1) An insurance or reinsurance company may entrust the management of a portion of its dedicated investment portfolio to one of the companies licensed by the General Financial Regulatory Authority to conduct the activity of forming and managing securities portfolios or managing investment funds, or both (hereinafter referred to as the "Investment Manager"), in accordance with the provisions of this Resolution.
Article (2) The dedicated investment portfolios whose management may be entrusted may invest in cash deposits, bank savings certificates, government securities, bonds, sukuk, investment fund documents, and shares, provided that the Portfolio Manager ensures investments comply with the rules and controls stipulated in Article (40) of the Supervision and Regulation of Insurance Law in Egypt issued under Law No. (10) of 1981 and Article (28) of its Executive Regulations. In all cases, the investment officer at the insurance or reinsurance company is obligated to monitor compliance with the rules and controls stipulated in Article (28) of the Executive Regulations regarding the total dedicated investment portfolio of the company, whether fully or partially entrusted to an Investment Manager as stated in Article (1).
Article (3) The following conditions must be met when contracting with a company managing dedicated investment portfolios: -1. The licensed company must have practiced the activity for at least three full years, and its average portfolio value 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 must be conditional 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 dedicated investments for the insurance or reinsurance company. -5. The insurance or reinsurance company is obligated to present the concluded contract with the Investment Manager, as well as any renewal or change of the Investment Manager, to its Board of Directors for approval. -6. The insurance or reinsurance company is obligated to provide the Authority with a certificate from portfolio management directors confirming compliance with Article (32) of the Executive Regulations to Law No. 10 of 1981, and must promptly notify the Authority if a decision is made to liquidate the total portfolio value, submitting a certificate from the Investment Manager confirming that the total portfolio value will not be liquidated without obtaining written approval from the Authority. -7. The insurance or reinsurance company is obligated to provide the Authority at the end of each quarterly financial period with a detailed breakdown of dedicated funds for the investment portfolio. Exemption from the aforementioned Article applies to items (2) and (4) if the following conditions are met:
- The licensed securities portfolio management or investment fund company has practiced the activity for at least five years.
- The average value of portfolios managed in the year prior to contracting is not less than two billion Egyptian pounds, after excluding the value of portfolios or funds transferred from the insurance or reinsurance company.
- The value of the portfolio entrusted to a single Investment Manager does not exceed 50% of the value of portfolios managed by that manager.
- No measures or penalties have been issued against the licensed securities portfolio management company entrusted with the portfolio during the three years preceding the contracting.
Article (4) The insurance or reinsurance company is obligated to ensure that the dedicated investment portfolio management contract includes the following: -1. The conditions stipulated in Article (3), items (1), (2), (3), (4), and (6). -2. The designation of the responsible manager for portfolio management at the contracted company. -3. The investment policy for managing the portfolio, including maximum allocation ratios for each financial instrument and concentration limits. (Note: A new paragraph was added at the end of Article 3 by Board Resolution No. 3 of 2023) -4. The contracted company's commitment to comply with the investment controls stipulated in Article (40) of the Supervision and Regulation of Insurance Law in Egypt issued under Law No. (10) of 1981 and Article (28) of its Executive Regulations, subject to monthly review by its internal auditor. -5. The contents of reports related to portfolio investments and performance that the management company is obligated to provide, along with the frequency of these reports. -6. The contracted company's policy regarding conflict of interest avoidance. -7. The commitment to deposit the investment portfolio with its components as referenced in Article (2) of this Resolution at one of the banks in Egypt licensed by the Authority to conduct custodian activities.
Article (5) The contracting of an insurance or reinsurance company to entrust the management of a dedicated investment portfolio takes effect only after its Board of Directors approves the contract. The minutes of the Board meeting approving the contracting must include a statement confirming the presentation of a copy of the draft contract, the prior work of the target Investment Manager, the experience of its investment management team, the latest audited financial statements of the Investment Manager company, the size of portfolios it manages, and its compliance with all conditions stipulated in this Resolution.
Article (6) The insurance or reinsurance company is obligated to 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 for such contracting.