Chairman of the Board of Directors

Decision of the Board of Directors of the Authority

No. (132) of 2014 dated 14/9/2014

Regarding the Regulations Governing the Interaction of Insurance Companies and Cooperative Insurance Associations with Reinsurers

The Board of Directors of the Egyptian Financial Supervisory Authority

Having reviewed the Law on Supervision and Control of Insurance issued by Law No. (10) of 1981 and its Executive Regulations;

And Law No. (10) of 2009 regulating supervision over markets and non-banking financial instruments;

And Presidential Decree No. (192) of 2009 issuing the Statute of the Egyptian Financial Supervisory Authority;

And Decision of the Board of Directors of the Authority No. (92) of 2013;

And the approval of the Board of Directors in its session No. (17) held on 14/9/2014;

Decided

(Article One)

Insurance companies and Egyptian cooperative insurance associations subject to the supervision and oversight of the Authority shall not utilize reinsurance operations except with companies registered on the Authority's list of reinsurers.

(Article Two)

The following conditions are required to register any company on the Authority's list of reinsurers:

1. A credit rating report issued by one of the following credit rating agencies:

• A.M. Best
• Standard & Poor's
• Fitch
• Moody's

And the Authority shall specify them according to the following table, and the credit rating event issued to them (provided that the period from the date of issuing the report and annual registration does not exceed fifteen months) from one of those agencies in reports issued by them regarding insurance and reinsurance companies shall not be less than the grade indicated next to each of those agencies as follows:

Credit Rating Agencies	Minimum Rating Specified by the Authority for Reinsurers
A.M. Best	(B+)
Standard & Poor's	(BBB)
Fitch	(BBB)
Moody's	(Baa)

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(Article Three)

The application for company registration on the Authority's list of reinsurers shall be submitted with the following documents and data:

1. A copy of the company's latest credit rating.

2. The name and location of the regulatory and supervisory authorities to which the company is subject.

3. The reinsurance branches that qualify the company abroad.

4. The financial statements and auditor's report for the reinsurance company for the last three financial years, guaranteed to show the development of total premiums, net retained premiums, asset value, changes in equity and investments, net investment income, and the company's operational performance and results.

5. The company's previous experience with local market companies, in case it has dealings with the Egyptian market.

6. The insurance coverage area or insurance branch to be reinsured and the proposed share to be assigned (if applicable).

7. Any additional data that the Authority deems necessary to complete the study of the company's application.

The Authority shall rule on the registration application within fifteen days from the date of submitting complete documents, and the concerned party shall be notified of the Authority's decision to reject or approve the application within one week of its issuance.

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(Article Four)

Egyptian insurance companies and cooperative insurance associations shall comply with the following:

1. Notify the Authority in the event of a downgrade in the credit rating of any registered reinsurer through them below the minimum specified in item (1) of Article Two, or in the event of a decrease in capital or net equity below the minimum specified in item (2/a) of Article Two, to consider taking necessary measures.

2. Exercise due diligence in managing risks associated with reinsurance, by selecting companies with strong solvency, good reputation, excellent track record, and expertise in the coverage areas or insurance branches involved. They shall be committed to diversifying reinsurance sources and avoiding geographical and sectoral concentration, all in accordance with technical and practical considerations for managing reinsurance activities.

Insurance companies shall also comply with the following regarding concentration ratios in reinsurance operations:

(a) For property insurance companies:

• The volume of active reinsurance operations with a single reinsurer shall not exceed 25% of the total active reinsurance operations with a single reinsurer, and the total active reinsurance operations with a single reinsurer shall not exceed 30% of the total reinsurance portfolio.
• In the event that the insurance company is owned – directly or indirectly – by more than 50% by the reinsurer, the insurance company shall be committed to ensuring that the volume of active reinsurance operations with the aforementioned reinsurer does not exceed 65% of the total reinsurance portfolio, and the insurance company shall also be committed to ensuring that the volume of active reinsurance operations with the aforementioned reinsurer does not exceed 75% of the total reinsurance portfolio.
• The volume of active reinsurance operations with reinsurers in a single country shall not exceed 40% of the total reinsurance portfolio, except in the case where the insurance company is owned by it – directly or indirectly – by more than 50%, in which case it must

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(b) For life insurance companies:

• In the event that the reinsurance ratio exceeds 30% of the total life insurance premiums underwritten, the volume of active reinsurance operations with a single reinsurer shall not exceed 30% of the total reinsurance portfolio, and the total active reinsurance operations with a single reinsurer shall not exceed 40% of the total reinsurance portfolio.
• In the event that the reinsurance ratio exceeds 30% of the total life insurance premiums underwritten, the volume of active reinsurance operations with a single reinsurer shall not exceed 40% of the total reinsurance portfolio, except in the case where the insurance company is owned by it – directly or indirectly – by more than 50%, in which case the volume of active reinsurance operations with reinsurers within the same country shall not exceed 65% of the total reinsurance portfolio.

Cooperative insurance associations shall also be bound by the regulations stipulated in the aforementioned items (a) and (b) regarding concentration ratios in reinsurance operations.

(Article Five)

This Decision replaces Decision of the Board of Directors of the Authority No. 92 of 2013, effective from 1/1/2015.

Reinsurers registered on the Authority's list shall align their status with the provisions of this Decision within a period not exceeding the end of the period mentioned in the preceding paragraph.

(Article Six)

This Decision shall be published in the Egyptian Gazette and on the Authority's website, and shall take effect from 1/1/2015.

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Chairman of the Board of Directors
Sherif Samy
470764

Egyptian Financial Supervisory Authority
Egyptian Financial Supervisory Authority

Smart Village, Building 15 - 84 B
Km 28, Cairo/Alexandria Desert Road
Giza Governorate, Postal Code: 12577

Telephone: (+202) 25370040 - Fax: (+202) 25345333 Email: info@efsa.gov.eg Website: www.efsa.gov.eg