Regulatory Alerts2019-01-01
Circular No. (5) for the Year 2019
The Financial Regulatory Authority (FRA) of Egypt issued Circular No. (5) of 2019 to strictly regulate the handling of tender-based insurance contracts by licensed insurers. The directive mandates that all such contracts must be executed directly through the insurer's management without any production commissions, except where documented evidence confirms a broker's active facilitation role and the contracting party explicitly permits brokerage involvement. Additionally, insurers are strictly prohibited from reclassifying these direct tender operations as production-based business during policy terms, renewals, or subsequent amendments.
Deputy Chairman of the Authority
Circular No. (5) for the Year 2019
Issued on 25/6/2019
Regarding Insurance Companies Accepting Insurance Operations via Tender
In the context of the Authority's efforts to ensure the safety and stability of non-banking financial markets and regulate them, and noting that some insurance companies are accepting insurance operations via tender and treating them as production, which contradicts the nature of such operations that are conducted directly through the insurance company's management, and therefore insurance brokerage plays no role in facilitating their conclusion.
In light of the provisions of the Law on Supervision and Control of Insurance in Egypt issued by Law No. 10 of 1981 and its executive regulations, and the Authority's Board of Directors Decision No. 23 of 2014 regarding the rules governing the practice of insurance and insurance brokerage activities within the Arab Republic of Egypt, the Authority emphasizes compliance with the following:
(1) All insurance operations contracted via tender must be conducted directly through the insurance company's management, and no production commissions shall be paid under any name. This is excepted for operations where it is proven that insurance brokerage plays a role in facilitating their conclusion, provided that documents supporting the broker's role in facilitating the insurance operation exist, along with the approval of the company's competent authority under its responsibility, and provided that there is no objection from the contracting party regarding the existence of insurance brokers, or that the contracting terms stipulate that dealings must be directly with the insurance company.
(2) Under no circumstances shall the production status of insurance operations accepted directly through the insurance company's management be converted into production operations, whether during the insurance period, upon renewal, or when making any amendments to those policies.
Deputy Chairman of the Authority
Advisor Rida Abdul Mu'ti
Financial Regulatory Authority
FINANCIAL REGULATORY AUTHORITY
Smart Village, Building no. B-136, Giza
Postal Code: 12577
Tel.: (00202) 35345350 - Fax.: (00202) 35370036
www.FRA.gov.eg
Smart Village, Building No. B-136, Giza, Egypt
Postal Code: 12577
Tel.: +202 35345350 - Fax: +202 35370036
info@fra.gov.eg