FINANCIAL REGULATORY AUTHORITY

Head of the Authority

Decision No. (278) of 2019

Issued on 26/9/2019

Regarding the Issuance of Regulations to Govern the Licensing of Takaful Insurance Companies to Operate under the Commercial Insurance System in the Egyptian Insurance Market

Chairman of the Board of Directors of the Authority Having reviewed the Law on Supervision and Regulation of Insurance in Egypt issued by Law No. 10 of 1981.
And the Law Regulating Supervision on Non-Banking Financial Markets and Instruments issued by Law No. 10 of 2009.
And the Presidential Decision No. 192 of 2009 Issuing the Statute of the Financial Regulatory Authority.
And the Authority's Board Decision No. 70 of 2016 Regarding the Issuance of a Guide for Applying Egyptian Accounting Standards to the Insurance Sector.
And the Authority's Board Decision No. 23 of 2019 Regarding the Issuance of Regulations to Govern Takaful Insurance to Operate in the Egyptian Insurance Market.

DECIDES

Article (1): These regulations shall be known as (Regulations Governing the Amendment of Licenses for Insurance Companies Licensed to Operate under the Takaful System to Operate under the Commercial Insurance System in the Egyptian Insurance Market).

Article (2): The regulations stipulated in this Decision shall apply to Takaful insurance companies wishing to amend their licenses to operate under the commercial insurance system, unless a specific provision is stated in the provisions of the Insurance Supervision and Regulation Law, its executive regulations, or any other laws.

Article (3): Takaful insurance companies wishing to obtain the Authority's preliminary approval to amend their license to operate under the commercial insurance system shall submit the following:

1. A request to amend the license to operate under the commercial insurance system, along with the approval of the company's board of directors and the Shariah Supervisory Board, certified by the company's General Assembly.
2. The company's plan for the amendment to operate under the commercial insurance system, including the reasons and justifications for the amendment, the transition period, the method for handling policies in effect under Takaful at the conversion date, and the rights and obligations of policyholders/participants, capital, shareholders' rights, the company's future business plan, expansion plan, and insurance branches.
3. A due diligence report (financial, technical, legal, and tax) to determine the rights and obligations at the amendment date for both Takaful policyholders (participants) and shareholders (shareholders), certified by an auditor registered with the Authority (other than the company's auditor) and certified by an actuary registered with the Authority (other than the company's actuary).
4. Proof that it has published an advertisement in at least two local daily newspapers indicating its intention to convert its business to operate under the commercial insurance system.
5. Regarding policies in effect under Takaful at the amendment date, submission of the legal, technical, accounting, and actuarial bases for handling those policies, including the following:
   • Proof that it has fully and finally discharged its obligations for all existing policies up to the amendment date.
   • Or that it has transferred its policies to another Takaful insurance company conducting the same activity as stipulated in Law No. 10 of 1981 and its executive regulations.
   • Or the company has decided to keep the policies in effect under Takaful at the amendment date until their expiration, while continuing to separate the accounting for those policies into independent accounts according to Takaful accounting standards for revenues, expenses, assets, and liabilities, in accordance with the Guide for Applying Egyptian Accounting Standards to the Insurance Sector issued by the Authority's Board Decision No. 70 of 2016 and the Authority's Board Decision No. 23 of 2019.
   • The Takaful insurance company requesting the amendment shall commit to fully closing the Qard Hasan (benevolent loan) balance (if any) and any unabsorbed losses at the amendment date within equity, while complying with the provisions of Law No. 10 of 1981 and its executive regulations regarding the statutory minimum capital and capital adequacy for risks.
6. The Takaful insurance company requesting the amendment to operate under the commercial insurance system shall commit to the distribution and disposal bases for the unallocated insurance surplus or that which has not been distributed to policyholders (participants) at the amendment date, as determined by the Shariah Supervisory Board, approved by the company's board of directors, and certified by the company's General Assembly, while complying with the provisions of Law No. 10 of 1981 and its executive regulations, and after obtaining prior approval from the Authority.

Article (4): A committee shall be formed by decision of the Chairman of the Authority's Board of Directors to study preliminary approval requests to amend the operating system of Takaful insurance companies to the commercial insurance system. Its mandate is to study the business plan submitted by the company for the amendment, the accounting, technical, and actuarial bases, the due diligence report, and the rights and obligations of policyholders and shareholders at the amendment date, and the appropriateness of the transition period. The committee may request any additional documents to complete its work and shall prepare a report on the technical and financial opinion regarding the company's request to amend its license to operate under the commercial insurance system.

Article (5): The Authority's decision granting preliminary approval to amend the operating system to the commercial insurance system shall be issued based on the study results prepared by the committee specified in the preceding article and the approval of the Authority's Board of Directors.

Article (6): License Amendment Procedures:
First: Takaful insurance companies that have obtained the Authority's preliminary approval to amend their operating system to the commercial insurance system and wish to obtain the Authority's approval for the license amendment shall submit a request on the form prepared by the Authority for this purpose, accompanied by the company's technical and economic feasibility study, the insurance branches planned to be conducted, and the company's business plan for the first five years from the amendment date operating under the commercial insurance system, clarifying estimates of premiums, expenses, production costs, and the technical bases on which they are built. The study shall be presented to the Committee for Adjudication on Technical and Economic Feasibility Studies for Insurance Activities for submission to the Authority's Board of Directors to issue a decision granting preliminary approval for the license amendment within three months from the date of fulfilling all required data and documents, and notifying concerned parties of the decision within five days from its approval date. Second: Following the issuance of the Authority's Board of Directors' decision granting preliminary approval for the license amendment, the company shall submit the following documents:

1. A statement of the names of the founders, each of their shares, nationalities, and previous experience.
2. Specific data regarding the company's board of directors members and those in charge of its management.
3. A copy of the company's amended organizational structure.
4. Samples of the policies issued by the company under the commercial insurance system for each of the insurance branches for which licensing is requested, including benefits, exclusions, terms, and prices for those policies.
5. Reinsurance arrangements under the commercial insurance system, which must be sufficient to protect policyholders' rights and the financial soundness of the company. The documents submitted in this regard must include a statement of reinsurance quota shares distribution and a comprehensive summary thereof, and the reinsurer must be among those registered with the Authority on the list of licensed reinsurers for insurance and reinsurance companies in Egypt to deal with them.
6. A copy of the company's commercial register and amended articles of association to operate under the commercial system.
7. Any other documents specified by the Authority's Board of Directors.

Article (7): The documents and data submitted by the company shall be presented to the committee formed within the Authority to review applications for the establishment and licensing of insurance companies, along with any additional documents requested by the committee to complete its work. The committee shall prepare a report on the technical and financial opinion regarding the company's request to amend its license to operate under the commercial insurance system.

Article (8): The results of the committee's study specified in the preceding article shall be presented to the Head of the Authority to make a decision on the license amendment.

Article (9): This Decision shall be published in the Egyptian Gazette and on the Authority's website, and shall take effect from the day following its issuance. Competent authorities are tasked with its implementation.

Chairman of the Board of Directors
Financial Regulatory Authority
Dr. Mohamed Omran

Smart Village, Building no. B-136, Giza, Egypt Postal Code: 12577 Tel.: (00202) 35345350 - Fax.: (00202) 35370036 info@fra.gov.eg www.fra.gov.eg