Prime Minister's Decision No. 2734 of 2018 Issuing the Bylaws of the Policyholders and Beneficiaries Guarantee Fund

Official Gazette - No. 51 Rec. (A) on December 25, 2018

Decision of the Prime Minister No. 2734 of 2018 Issuing the Bylaws of the Guarantee Fund for Policyholders and Beneficiaries with Insurance Companies

Prime Minister Having reviewed the Constitution; And the Civil Code; And the Law on Supervision and Control of Insurance in Egypt issued by Law No. 10 of 1981; And the Law on Joint Stock Companies, Companies Limited by Shares, Limited Liability Companies, and Single-Person Companies issued by Law No. 159 of 1981; And the Law on Mandatory Insurance for Civil Liability Arising from Accidents of Rapid Transport Vehicles within the Arab Republic of Egypt issued by Law No. 72 of 2007; And Law No. 10 of 2009 on Regulating Supervision over Non-Banking Financial Markets and Instruments; And the Bylaws of the General Authority for Financial Supervision issued by Presidential Decision No. 192 of 2009; And Presidential Decision No. 279 of 2018 delegating certain authorities to the Prime Minister; And after obtaining the approval of the Board of Directors of the General Authority for Financial Supervision; And based on the opinion of the State Council;

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Decided:

( Article One ) The provisions of the attached Bylaws shall apply regarding the Guarantee Fund for Policyholders and Beneficiaries with Insurance Companies registered with the General Authority for Financial Supervision.

( Article Two ) The provisions of the attached Bylaws shall apply to risks arising after the date of implementation of this Decision.

( Article Three ) This Decision shall be published in the Official Gazette and shall be implemented from the day following its publication. Issued at the Prime Minister's Office on 18 Rabi' al-Thani 1440 AH (Corresponding to December 25, 2018 AD).

Prime Minister Dr. Mustafa Kamal Madbouly

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Bylaws of the Guarantee Fund for Policyholders and Beneficiaries with Insurance Companies

( Chapter One ) Definitions and General Provisions

Article ( 1 ) In the application of the provisions of these Bylaws, the following words and expressions are intended to have the meaning indicated next to each of them: The Law: The Law on Supervision and Control of Insurance in Egypt issued by Law No. 10 of 1981. The Authority: The General Authority for Financial Supervision. The Member: Any insurance company registered and licensed by the Authority to conduct insurance activities in accordance with the provisions of the Law. The Client: The natural or legal person holding the policy issued by one of the Members or the beneficiary thereof, whether Egyptian or foreign. The Fund: The Guarantee Fund for Policyholders and Beneficiaries with Members. The Council: The Board of Directors of the Fund. The Competent Minister: The Minister responsible for applying the provisions of Law No. 10 of 2009 on Regulating Supervision over Non-Banking Financial Markets and Instruments. Liquidation: The cessation of all operations and activities of the Member, either voluntarily or by a decision issued by the Chairman of the Board of Directors of the Authority in accordance with the provisions of the Law and its Executive Regulations.

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Article ( 2 ) The Fund aims to compensate clients in the event that the Member is unable to fulfill its obligations towards them in accordance with the provisions, rules, and procedures set forth in these Bylaws, and this Fund does not aim to achieve profit. The Fund may cooperate with entities conducting similar activities in pursuit of its purposes and objectives, subject to the approval of the Authority's Board of Directors.

Article ( 3 ) Membership of all Members in the Fund is compulsory.

( Chapter Two ) Membership Participation and Annual Subscriptions

Article ( 4 ) The Member shall pay a membership subscription to the Fund amounting to fifty thousand Egyptian pounds. The Member shall also pay annual subscriptions at a rate of two per thousand of the total direct premiums, excluding premiums for mandatory insurance for civil liability arising from rapid transport accidents, in accordance with the annual financial statements accompanied by the auditor's report. In all cases, the membership subscription or annual subscriptions shall not be considered a debt owed to the Fund or a refundable insurance, and the Member shall not be allowed to dispose of them or offer them as collateral.

Article ( 5 ) The Fund Member is obligated to pay the annual subscriptions within forty-five days following the date of the annual financial statements. These subscriptions shall be calculated and collected in the same currency as the direct premiums due to the Member on issued policies, provided that the Council determines the procedures for collecting these subscriptions.

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In the event that the Member delays payment of the membership or annual subscriptions by the specified deadlines, the Fund shall notify the Member to fulfill the obligation via a registered letter with acknowledgment of receipt or hand delivery. If the Member fails to pay within fifteen days from the date of notification, the Authority shall be notified to consider taking appropriate action against them.

( Chapter Three ) Scope of Guarantee and Maximum Compensation Limit

Article ( 6 ) The Fund shall compensate clients for the Member's inability to fulfill its obligations towards them, in the event of license revocation, registration cancellation, declaration of bankruptcy, or liquidation, and after it is proven that the Member's assets and resources are insufficient to fulfill all its obligations to clients, as verified by the Authority. In the event of bankruptcy or liquidation of a Member or transfer of policies, the compensation due to the client shall be calculated in accordance with the provisions of Article (58) of the Law, and shall not exceed the maximum limit stipulated in Article (8) of these Bylaws.

Article ( 7 ) The Fund is not obligated to compensate in cases other than those mentioned in Article (6) of these Bylaws, specifically:

1. Any obligations or compensation arising after the date of publication of the decision to revoke the license, cancel registration, or liquidate, or the judgment declaring bankruptcy.
2. Any liability incurred by the Member under the provisions and conditions of any contract, agreement, commitments, or guarantees for third parties outside the licensed insurance activity.
3. Any non-insurance obligations owed by the Member to the client.

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4. Any liability arising from the Member's failure to pay the insurance amount due to the client's failure to pay the premiums due under the provisions of the insurance policy concluded between them.
5. All fees, expenses, or costs incurred by the client to prove the existence or determine the value of the loss covered within the scope of the coverages stated in the insurance policy.
6. Any compensation guaranteed by the Government or any other entity.
7. Any compensation arising from insurance policies issued by the Member where its liability has been transferred to another Member, except for the amount exceeding the other Member's liability and up to the maximum compensation limit stipulated in these Bylaws.
8. If it is proven that the policies giving rise to the compensation claim were issued through fraud or deceit.
9. Compensation arising from any moral or non-material damages.
10. If the compensation arises from the withdrawal (ban) of an unlicensed entity by the Authority in accordance with Article (57) of the Law.

Article ( 8 ) Subject to the provisions of Article (7) of these Bylaws, the Fund shall compensate clients for the Member's inability to fulfill its obligations towards them with a maximum limit of (80%) of the compensation value determined for a single policy, after deducting any obligations owed by the client to the Member. The Fund is not obligated to compensate more than what its funds allow. In the event that the value of the determined compensation exceeds the amounts available for compensation in the Fund, these amounts shall be distributed among the entitled claimants pro rata. The payment of the compensation amount shall be considered a final settlement of the client's dues against the Fund and a discharge of their liability regarding the incident subject to compensation.

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In all cases, the client may recourse against the violating Member for any amount exceeding what the Fund has paid them in compensation. The Fund may compensate clients by transferring their policies with the same terms and conditions to another Member, provided that the receiving Member agrees to this, particularly for long-term policies.

Article ( 9 ) Without prejudice to the provisions of the insurance contract stipulated in the Civil Code, the Fund shall subrogate the rights of its Members to recourse against the party responsible for the damages and losses insured against within the scope of the coverages stated in the insurance policies issued by the Member, resulting in compensation paid to the injured client.

Article ( 10 ) The compensation request must be submitted by the client or their legal representative, containing the required data and supporting documents, including a copy of the insurance policy and the procedures taken against the Member within thirty days from the date the client became aware of the incident requiring compensation or three calendar years from the occurrence of the incident subject to compensation, unless the client has taken judicial action against the Member or filed a complaint with the Authority within this period and the Authority has determined their entitlement to compensation. The Council shall issue a decision regarding the procedures for examining the compensation request, the documents to be attached, and the period for adjudicating it, not exceeding thirty days from the date of submitting the complete request. Compensation requests shall be examined by specialized technical committees composed of Fund employees, established by a decision of the Council Chairman. An expert from outside the Fund may be added to these committees as appropriate, provided they are registered with the Authority.

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The Fund must publish the procedures and document templates necessary for examining compensation requests on its website.

Article ( 11 ) Any interested party may appeal the Fund's compensation decisions before the Council within fifteen days from the date of notification. The appeal must state its subject and grounds, and be accompanied by supporting documents. The Council shall adjudicate the appeal within fifteen days from the date of its submission, and the Member and the client shall be notified of the Council's decision within one week from its issuance. The client has the right to object to the Council's decision before the Authority within one month from the date of notification. The Authority shall adjudicate the objection within fifteen days from its submission. The Authority's decision on the objection shall be final, without prejudice to the client's right to appeal the Authority's decision and resort to the courts.

Article ( 12 ) The Fund is obligated, if it becomes apparent during the examination of the client's compensation request that the Member or one of its employees committed a crime punishable by law, to immediately notify the Authority to take necessary measures.

Article ( 13 ) The Member is obligated, in cases where the Authority approves their return to conducting insurance activities, to pay all compensation amounts that the Fund has paid to their clients, prior to resuming activities, deducting the subscriptions the Member has previously paid to the Fund.

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( Chapter Four ) Management of the Fund

Article ( 14 ) The management of the Fund shall be undertaken by a Board of Directors formed by a decision of the Competent Minister, as follows:

1. Two members representing the Members; one representing companies operating in life insurance activities, and the other representing companies operating in property and liability insurance activities, selected by election in accordance with the rules and procedures issued by a decision of the Authority's Board of Directors.
2. Two members representing the clients, selected in accordance with the guidelines issued by a decision of the Authority's Board of Directors.
3. Three members of expertise selected by a decision of the Authority's Board of Directors, one of whom must be an actuary registered with the Authority. The term of membership on the Council shall be three years, and a member shall not be elected or appointed for more than two consecutive terms. An annual decision by the Authority's Board of Directors shall determine the attendance allowance, travel expenses, and annual bonus for the Chairman and members of the Council, not exceeding the bonus stipulated for the Authority's Board of Directors. Council members shall not receive any other amounts from the Fund. The Council shall choose a non-executive Chairman from among the members stipulated in Item (3) of the first paragraph of this Article, by a majority vote of the Council members.

Article ( 15 ) The Council is the supreme authority over the affairs of the Fund, managing its business, setting necessary policies to achieve its objectives, monitoring their implementation, and taking any measures to ensure the safety and preservation of its assets and funds. To this end, it may take any decisions it deems necessary to exercise its authorities, specifically:

1. Submitting a proposal to amend the Fund's Bylaws to the Competent Minister, with the amendment issued by a Prime Minister's Decision after obtaining the Authority's opinion.

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2. Establishing regulations for financial and administrative affairs, employee affairs, and other regulations related to the organization of the Fund's work and its organizational structure.
3. Approving the annual and quarterly financial statements, the auditor's report, and the draft annual budget.
4. Approving the annual report on the Fund's activities and operations.
5. Establishing the annual investment policy for the Fund's funds.
6. Issuing rules and procedures for examining and adjudicating compensation requests.
7. Establishing rules for scheduling the payment of compensation due to clients based on the funds available in the Fund, subject to approval by the Authority.
8. Reviewing topics that the Authority deems appropriate to present to it and fall within its authorities.
9. Approving awareness programs for policyholders and beneficiaries and publicizing the Fund's activities, subject to the approval of the Authority's Board of Directors. The Council may form one or more committees from among its members to perform specific tasks related to its authorities, meeting upon invitation from its Chairman or the Council Chairman if necessary.

Article ( 16 ) The Council shall meet upon invitation from its Chairman at least once every three months or whenever necessary. A meeting is not valid unless a majority of its members are present, and decisions are issued by the same majority. The Council Chairman may invite experts from among non-members to attend Council meetings without voting rights. In the event of a vacancy in the position of Council Chairman for any reason, the senior-most member among those stipulated in Item (3) of Article (14) shall act as the non-executive Chairman and convene the Fund's Board of Directors to meet within one month from the date of the vacancy to select a new non-executive Chairman in accordance with the applicable rules.

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In all cases, the Authority Chairman may convene the Council for an extraordinary meeting to review specific topics.

Article ( 17 ) Council meetings shall have minutes recording the attendance of its members, the deliberations of these meetings, and the decisions taken therein. A summary of these minutes shall be regularly recorded in a special register, and may be recorded and stored using electronic means.

Article ( 18 ) The Council Chairman shall preside over its meetings and represent it before the judiciary and in dealings with third parties, and has the right to sign on behalf of the Fund. Specifically, they shall:

1. Convene the Council to meet to review the proposed agenda.
2. Present all topics related to the purposes and activities of the Fund to the Council.
3. Monitor the implementation of Council decisions.
4. Monitor the application of administrative and financial regulations and all Authority regulations approved by the Council, and present them to the Board of Directors if necessary.
5. Supervise the internal control and audit systems for the Fund's operations.

Article ( 19 ) The Council shall appoint an Executive Manager for the Fund from among non-members, with the Authority's approval. The Executive Manager shall be responsible for managing the Fund's executive and administrative apparatus as determined by the Council. The Executive Manager shall prepare an annual report on the Fund's activities and operations for presentation to the Council and shall attend Council meetings without voting rights.

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( Chapter Five ) Financial System of the Fund

Article ( 20 ) The resources of the Fund shall consist of the following:

1. Membership subscriptions and annual subscriptions stipulated for the Fund.
2. Grants and donations approved by the Council.
3. Returns on the investment of the Fund's funds.
4. Any other resources approved by the Council and endorsed by the Authority's Board of Directors.

Article ( 21 ) The Fund shall have an independent budget, and its fiscal year shall begin on July 1st and end on June 30th. The Fund shall have one or more accounts at a bank registered with the Central Bank of Egypt, into which its resources shall be deposited, and the balance of this account shall be carried forward from one year to the next.

Article ( 22 ) The Fund is obligated to invest its funds in accordance with the annual investment policy established by the Council and endorsed by the Authority's Board of Directors. In all cases, the Fund shall not:

1. Establish companies.
2. Own any real estate assets for investment purposes, except with the approval of the Authority's Board of Directors.

Article ( 23 ) The Fund must maintain paper or electronic records and files that assist it in achieving its objectives, as determined by the Authority, specifically:

1. Member Register: Including their names, date of membership, and identification data.

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2. File for each Member: Including documents and papers related to membership and important correspondence between the Member and the Fund.
3. Claims Register: Divided by each insurance branch and by each Member, specifically including the date of the claim, its value, the name and address of the client or beneficiary, the compensation determined for them, the date of payment, and other data and information necessary to obtain accurate claim data and statistics.
4. Revenue Register: Including all Fund revenues, whether from membership subscriptions, annual subscriptions collected from members, or any other financial resources.
5. General and Administrative Expenses Register: Including all amounts disbursed by the Fund and the purposes of these expenditures.
6. Register of Compensation Paid to Clients and Register of Compensation Under Settlement: Divided by each insurance branch and by each Member, specifically including the value of the paid compensation, the date of payment, the names of beneficiaries, and all data contributing to the analysis of compensation data and the conduct of technical and actuarial studies.
7. Investment Register: Specifically including the invested amounts, the investment vehicles, their durations, and the value of returns achieved.
8. Appeals Register: Including appeals submitted to the Council, specifically recording the date of submission, the data of the appellant and the Member against whom it is filed, its subject, the decision taken by the Council regarding it, and its date. The Fund must maintain separate registers for life insurance and property insurance, and retain these records and files for at least ten years from the date of the last entry therein.

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Article ( 24 ) The Fund shall prepare quarterly financial statements to indicate its financial position and results of operations within forty-five days from the financial position date. The Authority shall be notified of these statements accompanied by the auditors' report within ten days from their preparation, after presentation to the Council. The Fund must prepare its annual financial statements within four months from the end of the fiscal year. The Authority shall be notified of the annual financial statements accompanied by the auditors' report within ten days from their preparation. Without prejudice to Egyptian accounting standards, the Fund shall present its financial statements in a format suitable for the nature of its activity and consistent with Egyptian accounting standards applied to the insurance sector.

Article ( 25 ) The Council shall establish an internal control system for its activities, committees, and employees, ensuring the proper application of laws, regulations, and decisions governing its work. Reports on this system shall be presented to the Council periodically.

( Chapter Six ) External Supervision and Control over the Fund's Operations

Article ( 26 ) The Authority has the right to inspect the Fund's records and request books and documents at any time to ensure obtaining the necessary data and explanations for supervision and control purposes. The Fund must provide all data and information requested by the Authority for this purpose and within the deadlines set by it. The Authority may conduct surprise inspections of the Fund's operations and activities to verify the proper application of the Law, regulations, and decisions issued in implementation thereof, or the provisions of these Bylaws.

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If the Authority determines that the Council or any Fund employee has violated the provisions of the Law, regulations, or decisions issued in implementation thereof, or the provisions of these Bylaws, it may take the following measures after notifying the Fund and specifying a period to rectify the violations:

1. Notifying the Fund's management to take the action determined by the Authority's Board of Directors within a specified period.
2. Requesting the removal of one or more Council members or any Fund employees.
3. Dissolving the Council and appointing a commissioner to manage it for a period not exceeding six months.

Article ( 27 ) The supervision of the Fund's accounts shall be undertaken by an auditor registered with the Authority, appointed and with fees determined by a decision of the Authority's Board of Directors.

Article ( 28 ) The Fund's financial position must be audited actuarially at least once every three years by one of the actuaries registered in the register maintained by the Authority. The Authority shall be notified within one week from its preparation. The Authority may request the Fund to conduct this audit if it deems it necessary. The Fund must prepare an annual report covering all its activities and a summary of client claims, indicating the volume of compensation paid by the Fund during the year. This report shall be submitted to the Authority and published on the Fund's website.

( Chapter Seven ) Final Provisions

Article ( 29 ) Without prejudice to the provisions of these Bylaws or any other law, Council members and Fund employees are obligated not to disclose any data or information obtained by virtue of their positions regarding the Fund or any Member, even after the termination of their relationship with the Fund.

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Article ( 30 ) Council members are obligated to disclose any interest they or their relatives up to the fourth degree have regarding any topics presented to the Council. The actuary member of the Council is prohibited from conducting any actuarial studies for the Fund for any purpose. If a Council member is a beneficiary of Fund compensation, the compensation must be approved by the Authority Chairman before disbursement.

Article ( 31 ) The Fund shall have a website on the internet representing its public interface, aimed at publishing guidelines to protect and raise awareness among insurance market participants and achieve prior prevention of risks for clients. It shall also publish periodic reports prepared regarding the Fund's activities and operations. The Fund is obligated to publish the auditors' report, annual and quarterly financial statements, and supplementary explanations on its website within one week at most from the date of notification by the Authority. The Fund must obtain the Authority's prior approval for its website address and content before launching it, in accordance with the same rules applicable to insurance companies.