Minimum Paid Up Capital for Insurers (Directive No. 108/2020)
Summary
This directive establishes the minimum paid-up capital requirements for insurers in Ethiopia, applicable to existing insurers, insurers under formation, and new applicants. It specifies different capital thresholds for general insurance, long-term insurance, and composite licenses, and outlines actions for non-compliant existing insurers and insurers under formation.
Who's affected
Insurance companies operating in Ethiopia, including existing insurers, those in the process of formation, and new applicants seeking a license.
Action required
Insurance companies must ensure their paid-up capital meets the specified minimums by December 31, 2015, and submit an action plan to the National Bank within three months of the directive's effective date if their capital is below the required level.
Key points
5- The directive sets new minimum paid-up capital for insurance licenses.
- Specific amounts are set for general, long-term, and composite licenses.
- Existing insurers and those under formation have a deadline (December 31, 2015) to meet the new capital requirements.
- An action plan must be submitted by non-compliant insurers.
- The National Bank has powers to enforce compliance, including closure or forced merger.
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Requirements
5- Minimum paid up capital for a general insurance license: Birr 60 million, fully paid in cash and deposited in a blocked bank account.
- Minimum paid up capital for a long-term insurance license: Birr 15 million, fully paid in cash and deposited in a blocked bank account.
- Minimum paid up capital for both general and long-term insurance licenses: Birr 75 million, fully paid in cash and deposited in a blocked bank account.
- Existing insurers and insurers under formation with capital below the specified levels must raise their paid-up capital to the required level by December 31, 2015.
- Existing insurers and insurers under formation below the required capital levels must submit an action plan to the National Bank within three months of the directive's effective date.
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Rights and permissions
1- Insurers have the right to obtain a license if they meet the minimum paid-up capital requirements.
Restrictions
3- Insurers failing to meet minimum capital requirements may be prohibited from accepting new business.
- Insurers failing to meet minimum capital requirements may be required to merge with another insurer.
- Insurers failing to meet minimum capital requirements may be closed.
Penalties
4- Prohibition from accepting new business until capital deficiency is corrected.
- Requirement to merge with another insurer.
- Closure of the insurer.
- Other measures considered appropriate by the National Bank.
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Objectives
3- To ensure adequate minimum capital for the commencement and continued operation, sustainability, and growth of insurance businesses.
- To enhance the retention capacity of insurers.
- To strengthen the competitive edge of insurance companies.
Organizations
1- National Bank of Ethiopia
Legal references
1- Insurance Business Proclamation No. 746/2012, articles 19(1) and 58(2)