Controls for banks practicing bancassurance activity

Mr. Chairman of the Board
Central Bank of Egypt

Greetings,

In light of the vision of the Central Bank of Egypt regarding the necessity of reactivating cooperation between the banking sector and the insurance sector due to its positive impact on banks and insurance companies, it has been decided to issue new controls for banks practicing bancassurance activity. These controls aim to establish a general framework for banks to practice this activity, including the following:

1. The method of practicing the activity.
2. The controls and procedures that must be followed to practice the activity, emphasizing:
   • The necessity of covering risks associated with bancassurance activity.
   • Complete separation between the insurance company's activity and the bank's activity.
   • Disclosure and transparency requirements.
3. General provisions for contracting between the bank and the insurance company.

Accordingly, we enclose a copy of the decision of the Board of Directors of the Central Bank of Egypt No. 2013/1010 issued at its meeting held on May 21, 2013, concerning the controls for banks practicing bancassurance activity, which takes effect from its date. Banks wishing to practice this activity must submit a request to the Central Bank of Egypt (Supervision and Regulation Sector) to obtain its approval after fulfilling the controls and procedures stipulated in the decision and before contracting with an insurance company. Additionally, banks practicing bancassurance activity must regularize their status within a maximum period of three months from its date, notifying the Central Bank of Egypt accordingly.

Please accept our highest regards,

Hesham Ramzy Abdel Hafez
Governor
Central Bank of Egypt

Issued No.: 2013/1010
Date: 2013/5/21

Decision of the Board of Directors of the Central Bank of Egypt No. 2013/1010 Issued at its meeting held on May 21, 2013 Concerning the controls for banks practicing bancassurance activity

Having reviewed:

• The Law on the Central Bank, the Monetary System, and Banking No. 88 of 2003 and its Executive Regulations;
• The Law on Combating Money Laundering issued by Law No. 80 of 2002 and its Executive Regulations;
• The controls on banks advertising insurance products issued by the Central Bank of Egypt via the Supervision and Regulation Sector letter dated September 17, 2003;
• The approval of the Board of Directors of the Central Bank of Egypt at its meeting held on May 21, 2013;

Has decided:

(Article One)
Method of practicing bancassurance activity through banks

1. Marketing of insurance products issued by insurance companies (licensed to practice the activity by the Financial Regulatory Authority) shall be conducted through banks operating in Egypt and registered with the Central Bank of Egypt.

2. A bank is entitled to conclude agreements with insurance companies (up to a maximum of two companies), provided that it does not offer similar products (e.g., life insurance / property insurance).

(Article Two)
Controls and procedures that banks must follow to practice bancassurance activity

Banks must adhere to the following controls and procedures at a minimum to practice this activity:

1. Conduct a comprehensive study on the insurance company intended to be contracted with.

2. Establish the necessary policies and procedures to address all risks associated with this activity.

3. Provide evidence that the company is registered with the Financial Regulatory Authority in a special register of companies licensed to practice bancassurance, and that its products are approved by the Financial Regulatory Authority.

4. Obtain a letter issued by the Financial Regulatory Authority stating that there is nothing preventing the company from practicing this activity.

5. Ensure that bancassurance customers are fully aware that the bank is merely a marketing channel and is not responsible for the terms and conditions of the insurance products being marketed, nor for the payment of any compensation, and that the responsibility for the foregoing lies solely with the insurance company, through the following:
   a. Designating a separate space at the bank branch to promote and market insurance products through insurance company employees separately from banking products. b. Clearly advertising that the insurance products being marketed are issued by the insurance company, not the bank.
   c. All documents related to the insurance product must be on the insurance company's stationery alone, including marketing materials.
   d. Obtaining a separate declaration from the customer stating that they are aware that the insurance product concerns the insurance company exclusively, not the bank. e. The insurance company alone issues, renews, amends, and cancels insurance documents, and bears all risks arising from the document, as the bank is no longer a party to the issued insurance document; therefore, the bank is not bound by any contracts or agreements between the customer and the company. f. Obtaining a declaration from the insurance company stating its full responsibility for resolving disputes and settling any complaints that may arise from presenting the insurance product to customers.

6. Ensure transparency when presenting insurance products to customers, by disclosing product terms clearly, while leaving the customer free to choose the insurance company and program suitable for them without interference from the bank.

7. Insurance products must be marketed through insurance company employees in accordance with controls issued by the Financial Regulatory Authority.

8. The continuation of the validity of "Controls on banks advertising insurance products" issued by the Central Bank of Egypt via the Supervision and Regulation Sector letter dated September 17, 2003.

(Article Three)
General provisions for contracting between the bank and the insurance company

Subject to general provisions regarding contracting between the parties, the contract signed between the bank and the insurance company must include at a minimum:

1. The insurance products intended to be marketed through bank branches.
2. Fees and commissions and the basis for their calculation.
3. Commitment to the confidentiality of accounts and information related to customers.
4. Mechanism for handling complaints received from customers.
5. Mechanism for dispute resolution between the parties, taking into account the declaration required to be obtained from the insurance company as stated in Article Two (Clause 5-f).

(Article Four)
Banks wishing to practice bancassurance activity must submit a request to the Central Bank of Egypt (Supervision and Regulation Sector) to obtain its approval after fulfilling the controls and procedures stipulated in the decision and before contracting with an insurance company. Banks practicing bancassurance activity must regularize their status in accordance with the provisions of this decision within a maximum period of three months from its date, notifying the Central Bank of Egypt accordingly.

(Article Five)
The Central Bank of Egypt (Supervision and Regulation Sector) must be notified in the event that a bank ceases this activity or changes the insurance company it is contracted with.

(Article Six)
Prior notification to the Central Bank of Egypt, accompanied by the approval of the Deputy Chairman of the Financial Regulatory Authority, is required regarding the Authority's supervision and regulation of insurance company windows operating in bank branches to obtain the approval of the Deputy Governor of the Central Bank of Egypt.

(Article Seven)
This decision shall be published in the Egyptian Gazette.

Governor
Hesham Ramzy Abdel Hafez