AmendmentOther

Manner of Reporting Quarterly and Annual Returns (Directive No. 109/2020)

National Bank Of Ethiopia109/2020

Summary

These directives outline the specific formats and methodologies for insurers to report their quarterly and annual financial and non-financial returns to the National Bank of Ethiopia. They also specify the methods for calculating technical provisions, such as unearned premium provision and outstanding claims, for both general and long-term insurance businesses.

Who's affected

Insurance companies operating in Ethiopia.

Action required

Insurers must adhere to the prescribed formats and calculation methods for submitting quarterly and annual financial and non-financial returns, including technical provisions and management expenses.

Key points

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  • New directives for reporting quarterly and annual returns by insurers.
  • Emphasis on standardized formats for financial and non-financial information.
  • Detailed methodologies for calculating technical provisions (UPP, outstanding claims, IBNR).
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    • Specific requirements for reporting management expenses and commissions.
    • Repeal of Directives No. SIB/17/1998 and Article 2.2(d) of Directive No. SIB/26/2004.

Requirements

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  • Insurers shall keep separate accounts and funds for long term and general insurance business.
  • Quarterly financial and non-financial returns in specific formats must be submitted within 30 days after the end of each quarter.
  • Annual audited financial statements, revenue accounts, supporting schedules, and actuarial valuation reports must be submitted within 90 days from the close of the financial year.
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    • Details for items marked 'specify' in return formats must be disclosed as footnotes.
    • Insurers shall maintain separate schedules for long-term policies and facultative reinsurance placements.
    • Annual and quarterly financial and non-financial returns must be prepared in accordance with the prescribed formats.
    • Insurers shall strictly follow the prescribed formats when publishing annual audited financial statements in newspapers.
    • Gross premiums shall be shown net of discounts and refunds.
    • Unearned Premium Provision (UPP) for general insurance business must be calculated using the 1/24th method for annual and short-term policies, and on a prorate basis for long-term policies.
    • Provision for outstanding claims must be reassessed quarterly and documented.
    • Provision for outstanding claims must be maintained at 100% for claims under litigation or dispute.
    • Provision for incurred but not reported (IBNR) claims shall be the higher of 10% of net earned premium or the result from claims triangulation returns.
    • Technical provisions for long-term insurance business, including actuarial provisions and IBNR claims, must be determined according to specified methods.
    • Management expenses shall be reported separately and calculated using the direct costing method.
    • Commission incurred and earned shall be reported separately and not deducted from premium amounts.

Rights and permissions

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  • Insurers have the right to request approval from the National Bank of Ethiopia to deal in specific classes of insurance.
  • Insurers may set aside other technical or actuarial provisions with adequate justification and explanation.
  • Insurers may allocate indirect costs associated with management expenses using an adopted and consistently applied method.

Restrictions

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  • Insurers must use the prescribed formats for reporting financial statements.
  • Unearned Premium Provision (UPP) for ceded premiums is applicable as per the reinsurance treaty agreement, or the 1/24th method if not specified.
  • UPP for non-proportional treaties shall not be applicable unless a special agreement is concluded with the reinsurer.
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    • Other technical or actuarial provisions must not be mixed up with unearned premium provision (UPP) or outstanding claims.
    • Commission incurred and earned cannot be deducted from premium amounts.

Objectives

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  • To clearly define the classes of insurance for which insurers should request approval.
  • To enable the National Bank of Ethiopia to receive essential financial and non-financial information for effective off-site surveillance.
  • To assess the financial soundness, managerial effectiveness, and stability of each insurer and the sector on an ongoing basis.
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    • To standardize the return formats for gathering complete and comprehensive information from insurers.

Organizations

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  • National Bank of Ethiopia

Legal references

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  • Proclamation No. 746/2012, Articles 5(4), 24(2), 26(3), 27(2), 31(1), 32(2), 33(1)(a), and 58(2)
  • Manner of Reporting Financial Information Directives No. SIB/17/1998
  • NBE Directive No. SIB/26/2004, Article 2.2(d)
Original sourcehttps://justice.gov.et/en/directives/manner-of-reporting-quarterly-and-annual-returns-directive-no-109-2020/
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