Minimum Paid-Up Capital for an Insurance Company Directive No. SIB/57/2022

የ ኢ ት ዮ ጵ ያ ብ ሔ ራ ዊ ባ ን ክ
N A T I O N A L B A N K O F E T H I O P I A
አ ዲስ አ በ ባ / A D D I S A B A B A

LICENSING AND SUPERVISION OF INSURANCE BUSINESS

Minimum Paid-Up Capital for an Insurance Company Directives Number SIB/57/2022

Whereas, adequate minimum capital is the principal element to kick off business and ensure continued operation, sustainability and growth of the business, and serves as cushion in case adverse operational result occurs;

Whereas, increase in capital plays an essential role in enhancing the retention capacity of insurance companies;

Whereas, adequate minimum capital enhances the competitive edge of an insurance company;

Now, therefore, in accordance with articles 19(1) and 64(2) of Insurance Business Proclamation No. 746/2012, as amended by Insurance Business (Amendment) Proclamation No.1163/2019, the National Bank of Ethiopia has hereby issued this Directive.

1. Short Title
This Directive may be cited as “Minimum Paid-Up Capital for an Insurance Company Directive No. SIB/57/2022”.

2. Definitions
In this Directive, unless the context provides otherwise:
2.1. “action plan” means a plan that clearly sets out specific action and timetable as to how the minimum required capital be fulfilled;

2.2. “an insurance company in the process of share subscription” means an insurance company that is in the process of selling shares after obtaining approval from the National Bank and has not conducted its subscribers meeting as of the effective date of this Directive;
2.3. “existing insurance companies” means insurance companies licensed by the National Bank before the effective date of this Directive;
2.4. “general insurance business” means all classes of insurance business other than long term insurance business;
2.5. “insurance company” means a company licensed by the National Bank to undertake insurance business or an insurance company owned by the Government;
2.6. “long term insurance business” means life insurance, annuity, pension, permanent health insurance and personal accident or sickness insurance underwritten by an insurance company as incidental to any of the former classes of businesses and any other class of insurance business as may be determined by the National Bank directive; and
2.7. “National Bank” means the National Bank of Ethiopia.

3. Scope of Application
The provisions of this Directive shall be applicable to:
3.1. existing insurance companies;
3.2. insurance companies in the process of share subscription; and
3.3. new applicants for insurance business license.

4. Minimum Paid-Up Capital Requirements
4.1. The minimum paid-up capital required to obtain a general insurance business license shall be Birr 400 million (four hundred million Birr), which ought to be fully paid-up in cash and deposited in blocked bank account(s) in the name of the insurance company to be established.
4.2. The minimum paid-up capital required to obtain a long-term insurance business license shall be Birr 100 million (one hundred million Birr), which ought to be fully paid-up in cash and deposited in blocked bank account(s) in the name of the insurance company to be established.
4.3. The minimum paid-up capital required to obtain both general and long-term insurance businesses license shall be Birr 500 million (five hundred million Birr), which ought to be fully paid-up in cash and deposited in blocked bank account(s) in the name of the insurance company to be established.

5. Transitory Provisions
5.1. Existing insurance companies whose paid-up capital, on the effective date of this directive, is below Birr 400 million (four hundred million Birr) for general insurance business or Birr 100 million (one hundred million Birr) for long-term insurance business or Birr 500 million (five hundred million Birr) for both general and long-term insurance businesses shall:
5.1.1. raise their paid-up capital to the stated level by the end of June 30, 2027; and
5.1.2. submit an action plan, as to how the required paid-up capital shall be fulfilled, to the National Bank within 30 (thirty) days after the effective date of this Directive.
5.2. An insurance company in the process of share subscription, which succeeds to collect a minimum paid-up capital of Birr 60 million (sixty million Birr) for general insurance business or Birr 15 million (fifteen million Birr) for long-term insurance business or Birr 75 million (seventy five million Birr) for general and long-term insurance businesses from founding shareholders, holds subscribers meeting and submits final application to the National Bank within a maximum of 1 (one) year after the effective date of this Directive shall be permitted to get an insurance business license with a minimum paid-up capital of Birr 60 million (sixty million Birr) for general insurance business or Birr 15 million (fifteen million Birr) for long-term insurance business or Birr 75 million (seventy five million Birr) for general and long-term insurance businesses.

However, such an insurance company shall be required to comply with Article 4 of this Directive within 7 (seven) years after commencement of the insurance business and shall submit its action plan towards this end.

6. Sanctions
6.1. If an insurance company fails to comply with the minimum paid-up capital requirements stipulated under Article 4 of this Directive, the National Bank may:
6.1.1. suspend the license and put the insurance company under receivership in line with the relevant provisions of Insurance Business Proclamation No. 746/2012, as amended by Insurance Business (Amendment) Proclamation No.1163/2019; and/or
6.1.2. take other measures it considers appropriate.
6.2. Notwithstanding the provisions of sub-article 6.1 hereinabove, an insurance company upon the event of seeing difficulty in meeting the minimum paid-up capital as required under Article 4 of this Directive may undertake voluntary merger or acquisition transactions with another insurance company before the lapse of the stated period under sub-articles 5.1 and 5.2 of this Directive. However, such transactions shall not commence without obtaining the prior written approval of the National Bank.

7. Repeal
Minimum Paid-Up Capital for Insurance Companies Directive No. SIB/34/2013 is hereby repealed and replaced with this Directive.

8. Effective Date
This Directive shall enter into force as of the 15th day of September 2022.

Yinager Dessie (PhD)
Governor