Decision No. (535) for the Year 2017 dated 2017/6/7

Regarding the basis for determining estimated loss rates for the purpose of calculating reverse reinsurance provisions in accordance with the provisions of Article (25) of the Executive Regulations of Law No. 10 of 1981.

Chairman of the General Authority for Financial Supervision

Having reviewed the Law on Supervision and Control of Insurance in Egypt issued by Law No. 10 of 1981, and its executive regulations and amendments thereto.

And having reviewed Law No. 10 of 2009 on regulating supervision over markets and non-banking financial instruments.

And having reviewed Presidential Decision No. 192 of 2009 issuing the Basic Statute of the General Authority for Financial Supervision.

And having reviewed the Board of Directors of the General Authority for Financial Supervision Decision No. (70) of 2016 issuing the guide for applying Egyptian Accounting Standards to the insurance sector.

And having reviewed the memorandum prepared by the Central Administration for Supervision and Control of Insurance Companies at the Authority dated 2017/5/25.

And having reviewed the letter from Mr. President of the Egyptian Union of Insurance Companies dated 2017/6/6 on this matter.

Decided

Article One

First: Basis for forming the reverse reinsurance provision

From the income and expense statement of each branch of property and liability insurance at the end of each financial year, the following shall be established:

(1) An amount equivalent to 75% of premiums for natural disasters and riots and sabotage.

(2) A percentage of net earned premiums equal to the difference between the actual loss rates realized at the end of the financial year and the estimated loss rates attached to the company's actuarial report, upon which the insurance prices for each insurance branch were calculated separately for that year, not exceeding 50% of the insurance branch's operational surplus before calculating the provision.

And the following shall be observed:

(a) The provision shall not be established for branches where the actual loss rates exceed 100%.

(b) If the value of the provision reaches 100% of the branch's claims provision under coverage, the company may cease avoiding this provision.

Second: Basis for using the provision

The provision may be utilized if the actual loss rate for any insurance branch exceeds the previous year's rate by an amount equal to 20% of the estimated loss rate for that year, with a maximum limit of 20% of the provision balance established in the branch at the beginning of the financial year.

Article Two

Insurance companies and cooperative insurance associations are obligated to provide the Authority annually with the estimated loss rates upon which the insurance prices for each insurance branch were calculated, certified by the company's actuary, by a deadline of the middle of the second month following the end of the financial year. The company's actuary report submitted to the Authority must include the calculation of the provision and a certificate regarding its adequacy.

Article Three

This Decision shall be published in the Official Gazette and on the Authority's website, and shall be enforced from the day following its publication. It shall apply to financial statements starting from the year ending on June 30, 2017.

<!-- Signature and Seal -->
Chairman of the Authority
Sherif Samy
46076

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