Requirements for Licensing and License Renewal of Insurance Business Directives No. SIB/33/2013

የኢትዮጵያ ብሔራዊ ባንክ NATIONAL BANK OF ETHIOPIA ADDIS ABABA

LICENSING AND SUPERVISION OF INSURANCE BUSINESS

Requirements for Licensing and License Renewal of Insurance Business Directives No. SIB/33/2013

Whereas, promoting strong and viable insurance sector in Ethiopia is crucial for macroeconomic stability and growth;

Whereas, proper licensing and supervision of insurance and the insurance system is important to ensure the safety and soundness of the sector;

Whereas, establishing clear, objective and transparent requirements for licensing and renewal is essential to promote the sector;

Now, therefore, in accordance with, Articles 4(1), 4(4), and 58(2) of Insurance Business Proclamation No. 746/2012, the National Bank of Ethiopia hereby issues these directives.

1. Short Title These directives may be cited as "Requirements for Licensing and License Renewal of Insurance Business Directives No. SIB/33/2013"

2. Definitions For the purpose of these directives, unless the context requires otherwise:

2.1 "chief executive officer" means a person, by whatever title that person may be referred to, who is primarily responsible for the day-to-day management of the affairs of an insurer;

2.2 "director" refers to any member of the board of directors of an insurer, by whatever title he/she may be referred to;

2.3 "influential shareholder" means a person who holds directly or indirectly two percent or more of the total subscribed capital of an insurer;

2.4 "National Bank" means the National Bank of Ethiopia;

2.5 "organizers" means persons who have initiated plans or facilitated the formation of the insurer and who shall jointly and severally be liable to third parties in respect of commitments entered into during the formation process of an insurer;

2.6 "persons with significant influence" means influential shareholders, directors, chief executive officer and senior executive officers;

2.7 "project manager" means a person who shall be in charge of the whole process of obtaining business license of an insurer;

2.8 "related party" means on the one hand, an organizer, a project manager, a shareholder, a director, chief executive officer or senior executive officer of that insurer and/or the spouse or relation in the first degree of consanguinity or affinity of such organizer, project manager, shareholder, director, chief executive officer or senior executive officer, and

on the other, a partnership, a common enterprise, a private limited company, a share company, a joint venture, or any other business in which the organizer, project manager, shareholder, director, chief executive officer or senior executive officer of the insurer and/or the spouse or relation in the first degree of consanguinity or affinity of such organizer, project manager, shareholder, director, chief executive officer or senior executive officer has a business interest as owner, partner, shareholder, director, chief executive officer, senior executive officer or in any other way or form;

2.9 "senior executive officer" means any officer of an insurer, by what ever title he/she may be referred to, who is deputy to the chief executive officer or is directly reporting to the board of directors.

3. Scope of Application The provisions of these directives shall be applicable to those who desire to obtain or renew insurance business license.

4. Organizers and Project Manager 4.1 Organizers shall appoint a project manager. 4.2 The project manager shall have: 4.2.1 first degree from recognized higher learning institution, and 4.2.2 business experience preferably in designing insurance project. 4.3 The project manager and the organizers shall be honest, reputable and diligent. In determining integrity of the organizers and project manager, all relevant factors shall be considered, including but not limited to: 4.3.1 whether the person has a record or evidence of previous conduct and activities where he/she has been convicted for a criminal offence under any law designed to protect members of the public from dishonesty or fraud whether in Ethiopia or elsewhere; 4.3.2 whether the person has a record of withholding information from public authorities, submission of incorrect financial or other statements, prior refusal of regulatory/supervisory approval and failure to comply with requirements of regulatory/supervisory body, other corrective actions or interventions by public authorities; and 4.3.3 whether the person has a record of disciplinary measures or any dispute with previous employers, or compliance with a code of conduct which has led to the imposition of a penalty under employment law or any other disciplinary measures imposed by trade or professional associations.

5. Licensing Requirements Requirements to obtain insurance business license include the following.

5.1 Pre-application phase 5.1.1 Evidence of registration of trade name from Ministry of Trade and/or Regional Trade Bureau. 5.1.2 Signed minutes of first meeting of organizers along with attendance sheet. 5.1.3 Submission of prospectus, which is a printed statement that describes and forecasts the course or nature of the company along with expected risks, to be distributed to prospective investors. 5.1.4 Written application requesting to open blocked subscription account indicating the name of the bank(s)/branch(es). 5.1.5 Duly completed application form and propriety test questionnaire, as specified under Attachments I, II and III of these Directives, for organizers and project manager. 5.1.6 Evidence of payment of investigation fee.

5.2 Application phase 5.2.1 Duly completed application form, as specified under Attachment IV of these Directives, shall be submitted, together with all enclosures as stated herein, to the insurance Supervision Directorate. 5.2.2 Evidence of paid-up capital which includes certificate of deposits in a blocked account and evidence for valuation of contribution in kind (if any). 5.2.3 Signed minutes of subscribers meeting with attendance sheet. 5.2.4 List of names, nationality, address, number and value of subscribed and paid up shares of founders to be published in newspaper. 5.2.5 Articles and memorandum of associations written in Amharic. 5.2.6 Authenticated ownership certificate and/or lease agreement for building, land, vault, equipment, fixtures and professional services. 5.2.7 Evidence for insurance coverage for premises acquired or leased. 5.2.8 Description of actual purchases made or proposed purchase of goods and services or lease of real estate by the insurer from related parties, organizers and project manager who are not shareholders. 5.2.9 Duly completed general information and propriety test questionnaires for influential shareholders, directors, chief executive officer and senior executive officers as per ANNEXES I and II of these Directives. 5.2.10 Disclosure of names, nationality, address, numbers and values of subscribed capital of influential shareholders who have acquired 2% or more. 5.2.11 Business plan stating at least the following: a) executive summary, b) introduction, c) macroeconomic analysis, d) financial sector analysis, e) insurance sector analysis, f) business environments, g) organization charts of the institution with brief description of the functions of the main organizational units, h) strategic and operational plans, i) source of capital and finances, j) products and services, k) technological competency, l) accounting policies, m) assumptions for financial projections, n) financial projections for the first three years including revenue account, balance sheet, income statement, cash flow projections and sensitivity analysis, and o) conclusion /recommendation. 5.2.12 Specimen insurance policy together with endorsement and proposal forms for each class of insurance business to be undertaken by the insurer. 5.2.13 Schedule of premium and commission rates for each class of insurance business that the applicant proposes to undertake. 5.2.14 Reinsurance policy and program. 5.2.15 Confirmation for reinsurance arrangement. 5.2.16 Evidence for payment of licensing fee.

6. Conditions for Commencement of Operation To commence operation, a licensed insurer shall: 6.1 put in place at a minimum comprehensive policies, procedure manuals, programs and guidelines for: 6.1.1 human resource management, 6.1.2 investment, 6.1.3 liquidity management, 6.1.4 internal audit/control, 6.1.5 management information system/MIS, 6.1.6 planning and budgeting, 6.1.7 finance, 6.1.8 risk management, 6.1.9 fixed assets, 6.1.10 corporate governance, 6.1.11 detection and prevention of criminal activities, 6.1.12 outsourcing, 6.1.13 marketing, 6.1.14 underwriting, 6.1.15 claims 6.1.16 reinsurance, and 6.1.17 procurement; 6.2 hire, train and place adequate and appropriate staff; 6.3 ensure that operating area and the insurance hall include: a) proper ventilation and circulation of fresh air, b) suitable and clean sanitary service, c) sufficient and suitable lighting, d) displays of working hours, e) fire extinguishers at appropriate places, 6.4 have insurance policy for the following at a minimum: a) fire and other perils, b) burglary and theft, c) fidelity, and d) cash and valuables in premise and in transit.

7. Display of License A licensed insurer shall at all time display in a conspicuous place its valid original business license in its head office and copy of the business license in its branches.

8. Renewal of License 8.1 An insurer shall renew its business license every year. 8.2 An insurer applying for renewal of business license shall present the following: 8.2.1 application requesting renewal of business license and any changes in the particulars of the existing license; 8.2.2 evidence of deposit slip for payment of additional statutory deposit 8.2.3 original business license; and 8.2.4 evidence of payment of renewal fee and/or penalty.

9. Fees 9.1 A company applying to obtain new insurance business license shall pay: 9.1.1 investigation fee of Birr 3,000; and 9.1.2 licensing fee of Birr 3,000 for general or long term insurance or Birr 4,000 to undertake both. 9.2 An insurer applying for renewal of its business license shall pay renewal fee of Birr 3,000 for general or long-term insurance or birr 4,000 to undertake both.

10. Repeal The provisions of articles 1-3, and 6 of the Licensing and Supervision of Insurance Business Directives No. SIB/1/1994 are hereby repealed and replaced by these directives.

11. Effective date These Directives shall enter into force as of the 1st day of March 2013.

TEKLEWOLD ATNAFU GOVERNOR

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Attachment I Application form for Organizers

General information

No.	Full name¹	Nationality	Address
			City	Sub-city	Wereda	House No.
1
2
3

1. Proposed name of the insurer (under formation)
2. Name of organizing committee's chairperson 2.1 Address
3. I hereby confirm that the above particulars and the information provided in the attached enclosure are true and correct.

Date: ____________________ Signature of organizing committee's chairperson: ____________________

¹ Including grand father

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Attachment II Application form for project manager

General information

Full name¹	Nationality	Address
		City	Sub-city	Wereda	House No.	Tel.

1. Proposed name of the insurer (under formation)
2. Present position of the project manager
3. I hereby confirm that the above particulars and the information provided in the attached enclosure are true and correct.

Date: ____________________ Signature: ____________________

¹ Including grand father

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Attachment III: PROPRIETY TEST QUESTIONNAIRE (Organizer, project manager-underline)

Please give yes or no answers for the following questions and if your answer is "yes" please give particulars.

Full Name: __________________________________________________________________ (Organizer, project manager - Underline) Name of insurer: _____________________________________________________________

		Yes	No
1.	Have you been charged or convicted of any criminal offence, particularly an offence relating to dishonesty or fraud, under any law whether in Ethiopia or elsewhere?	[ ]	[ ]
	If yes, please give particulars ________________________________________________
2.	Have you ever been imposed with corrective actions or interventions by pubic authority due to withholding information or submission of incorrect financial or other statements?	[ ]	[ ]
	If yes, please give particulars ________________________________________________
3.	Have you ever been refused approval by any regulatory/supervisory body or failed to comply with requirements of regulatory/supervisory body?	[ ]	[ ]
	If yes, please give particulars ________________________________________________
4.	Have you ever been in dispute with previous employers' concerning fulfillment of position or compliance with a code of conduct which has led to the imposition of a penalty under employment law or ever been dismissed or requested to resign from any office of employment or disciplinary measures imposed by trade or professional associations?	[ ]	[ ]
	If yes, please give particulars ________________________________________________
5.	Have you ever been refused, whether in Ethiopia or elsewhere, the right to carry on any trade, business or profession for which a special license, registration or other authority is required?	[ ]	[ ]
	If yes, please give particulars ________________________________________________
6.	Have you ever been declared bankrupt whether in Ethiopia or elsewhere or have your assets been sequestrated because of bankruptcy or foreclosed by a bank due to failure to repay a loan?	[ ]	[ ]
	If yes, please give particulars ________________________________________________
7.	Have you ever been convicted of default on repayment of bank or other credits or tax payment?	[ ]	[ ]
	If yes, please give particulars ________________________________________________
8.	Have you ever been carrying non-performing loans or your account been closed and not reinstated by any bank in line with relevant directives of the National Bank?	[ ]	[ ]
	If yes, please give particulars ________________________________________________

Declaration I am aware that under sub-article 6(b) of Article 57 of Insurance Business Proclamation No. 746/2012, it is an offense to provide false or misleading statement.

I certify that the information and/ or statements given above are complete and accurate to the best of my knowledge, and that there are no other facts relevant to this application of which the National Bank should be aware. I also undertake to inform the National Bank of any changes material to the application.

Name: __________________________________________________ Signature: _______________________________________________ Date: ___________________________________________________

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Attachment IV

APPLICATION FORM TO UNDERTAKE INSURANCE BUSINESS

1. Name of applicant and designation ________________________________________________
2. Name of the insurer (under formation) _____________________________________________
3. Name of the contact person ______________________________________________________ Address: ________________________________________________________________________
4. Address of the insurer (under formation)

• Street (location): ____________________________________________________________
• Building: ___________________________________________________________________
• Postal address: ______________________________________________________________
• Telephone no.: ______________________________________________________________
• Fax: _______________________________________________________________________
• E-mail _____________________________________________________________________

5. List of shareholders who own 2% or more

No.	Full name¹	Nationality	City	Sub-city	Wereda	House No.	Tel.	Subscribed capital			Paid up capital
								Number of shares	Amount in birr	% of Subscribed Shares	Number of shares	Amount in birr
1
2
.
.
									Grand Total

Note: List of subscribers to be annexed to the Memorandum and Articles of Association should follow the same format ¹ Including grandfather

6. Names, Address and Shareholdings of Board Members

No.	Full name²	Nationality	City	Sub-city	Wereda	House No.	Tel.	Subscribed capital		Paid up Capital
								Number of shares	Amount in birr	Number of shares	Amount in birr
1
2
.
.
									Grand Total

² Including grandfather

7. Products and Services of the insurer 7.1 Identify the main class or classes of Insurance to be undertaken. Long term [ ] General [ ] 7.2 If general insurance business is to be undertaken, identify the class or classes: 7.2.1 ____________________ 7.2.2 ____________________ 7.2.3 ____________________ 7.2.4 ____________________ 7.2.5 ____________________ 7.2.6 ____________________ 7.2.7 ____________________ 7.2.8 ____________________ 7.2.9 ____________________ 7.2.10 ___________________

8. Paid-up capital contribution 8.1 In cash _____________________________________________________________________ 8.2 In kind (specify the type of property and value in birr and the manner of valuation, if any) __________________________________________________________________________

9. Initial capital of the insurer (under formation) in birr ________________________________ 9.1 Subscribed capital birr ____________________ (____________________ birr) 9.2 Paid-up capital birr ____________________ (____________________ birr)

10. Shares 10.1 Number of shares subscribed __________________________________________________ 10.2 Par value of the share in birr __________________________________________________

11. Provide the following with respect to: 11.1 In cash ____________________________________________________________________

Item	Manner of acquisition³	Cost
a. Building
b. Land
c. Vault
d. Equipment
e. Fixture
f. Professional services
Total

11.2 Indicate if any of items herein above is acquired from related parties. ________________________________________________________________________________

12. Types and extent of proposed insurance coverage __________________________________

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13. Name and address of reinsurer __________________________________________________

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14. Name and address of actuary ____________________________________________________

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15. Please give statement that members of board of directors, chief executive officer, senior executive officers and influential shareholders are vetted to fulfill the requirements stated in Article 4 (1h), Article 15(1) and Article 16 of Insurance Business Proclamation No. 746/2012, and Requirements for Persons with Significant Influence in an insurer Directives SIB/32/2012.

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16. Any additional comments: ______________________________________________________

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³ Lease, purchase, rent . . .etc, and attach agreements as per the manner of acquisition

17. I hereby confirm that the foregoing statements, particulars, enclosures, and information are true and correct to the best of my knowledge.

Date ____________________ Signature ____________________ Name and official designation of the applicant

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CONFIDENTIAL NATIONAL BANK OF ETHIOPIA

ANNEX I: GENERAL INFORMATION (Influential shareholder, director, chief executive officer or senior executive officer - Underline)

NB: In case the space provided is inadequate, use additional paper.

1. Name of Insurer: _____________________________________________________________
2. Personal information a. Full Name: ________________________________________________________________ b. Date of birth: _____________________________________________________________ c. Place of Birth: ____________________________________________________________ d. Nationality: _______________________________________________________________ e. Identification Card Number and Date of Issue: __________________________________ f. Passport Number and Date of Issue: ___________________________________________ g. Tax Payer Identification Number: _____________________________________________ h. Address: City: ____________________ Sub-City: ____________________ Kebele: ____________________ House No.: ____________________ Postal Address: ____________________ Telephone No.: ____________________ i. Educational Qualification: ___________________________________________________ j. Summary of Work Experience:

No.	Organization	Position	Duration	Number of years

k. Name(s) of Your Bankers for the Last 5 Years: __________________________________

3. Please list financial institutions in which you currently (as of completing this form) own shares in the following table.

Name of financial institution	Subscribed shares owned	Remarks
	In number	Share in the financial institution's from the total subscribed capital (%)

4. Description of your past and current business activities in Ethiopia and abroad (if applicable) a) Current shareholding or ownership in non-financial companies

Company name	Date of incorporation	Amount of shareholding	% of shareholding (in total shares of the company)	Remark

b) Past shareholding or ownership in a company (shares you owned in the past but had been relinquished) including financial institutions

Company name	Date of incorporation	Amount of shareholding	% of shareholding (in total shares of the company)	Reason for termination of shareholding	Remark

c) Borrowings (directly or indirectly)

Name of borrower*	Name of lending institution	Type of facility /loan	Amount borrowed	Date of approval	Security offered (type)	Value of security	Current outstanding Balance	Status of the loan (pass, s. mention, doubtful ...)	Remark

*Including all companies 10% or more owned by the applicant, the applicant's spouse and children less than 18 years.

5. If legal person (for influential shareholders), please complete the following table for the recent three financial years (Please also attach audited financial statements)

Year	Assets	Liabilities	Net worth	Remarks

6. If you are new shareholder to the insurer or existing shareholder planning to increase your shareholding above what you currently own, please provide details of the actual source(s) of funds that you, as a shareholder, would like to invest or use in the acquisition of the shares in the insurer.

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ANNEX II: PROPRIETY TEST QUESTIONNAIRE (Influential shareholder, director, chief executive officer or senior executive officer - underline)

Please give yes or no answers for the following questions and if your answer is "yes" please give particulars.

Full Name: __________________________________________________________________ (Influential shareholder, director, chief executive officer or senior executive officer - Underline) Name of insurer: _____________________________________________________________

		Yes	No
1.	Have you or the legal person in which you were a director, chief executive officer or senior executive officer or owner been charged or convicted of any criminal offence, particularly an offence relating to dishonesty, fraud, under any law whether in Ethiopia or elsewhere?	[ ]	[ ]
	If yes, please give particulars ________________________________________________
2.	Have you or the legal person in which you were a director, chief executive officer or senior executive officer or owner ever been imposed with corrective actions or interventions by pubic authority due to withholding information or submission of incorrect financial or other statements?	[ ]	[ ]
	If yes, please give particulars ________________________________________________
3.	Have you or the legal person in which you were a director, chief executive officer or senior executive officer or owner ever been refused approval by any regulatory/ supervisory body or failed to comply with requirements of regulatory/supervisory body?	[ ]	[ ]
	If yes, please give particulars ________________________________________________
4.	Have you ever been in dispute with previous employers' concerning fulfillment of position or compliance with a code of conduct which has led to the imposition of a penalty under employment law or ever been dismissed or requested to resign from any office of employment or disciplinary measures imposed by trade or professional associations?	[ ]	[ ]
	If yes, please give particulars ________________________________________________
5.	Have you ever been refused, whether in Ethiopia or elsewhere, the right to carry on any trade, business or profession for which a special license, registration or other authority is required?	[ ]	[ ]
	If yes, please give particulars ________________________________________________
6.	Have you or the legal person in which you were a director, chief executive officer or senior executive officer or owner been declared bankrupt whether in Ethiopia or elsewhere or have your assets been sequestrated because of bankruptcy or foreclosed by a bank and/or micro financing institutions due to failure to repay a loan?	[ ]	[ ]
	If yes, please give particulars ________________________________________________
7.	Have you or the legal person in which you were a director, chief executive officer or senior executive officer or owner been convicted of default on repayment of bank or other credits or tax payment?	[ ]	[ ]
	If yes, please give particulars ________________________________________________
8.	Have you or the legal person in which you were a director, chief executive officer or senior executive officer or owner been carrying non-performing loans or account been closed and not reinstated by any bank in line with relevant directives of the National Bank?	[ ]	[ ]
	If yes, please give particulars ________________________________________________
9.	Has your purchase of shares in a financial institution been funded or to be funded by another person or legal entity who is actually bankrupted or technically insolvent because of irresponsible or reckless management, fraud or illegal business practice?	[ ]	[ ]
	If yes, please give particulars ________________________________________________
10.	Has your minimum net worth at the time of acquisition of shares at least greater than the shares acquired or to be acquired from a financial institution?	[ ]	[ ]
	If yes, please give particulars ________________________________________________
11.	Are you currently member of board of directors or chief executive officer in any of the financial institutions?	[ ]	[ ]
	If yes, please give particulars ________________________________________________

Declaration I am aware that under sub-article 6(b) of Article 57 of Insurance Business Proclamation No. 746/2012, it is an offense to provide false or misleading statement.

I certify that the information and/ or statements given above are complete and accurate to the best of my knowledge, and that there are no other facts relevant to this application of which the National Bank should be aware. I also undertake to inform the National Bank of any changes material to the application.

Name: __________________________________________________ Signature: _______________________________________________ Date: ___________________________________________________