licensing and supervision of insurance business

CONSOLIDATED NATIONAL BANK of ETHIOPIA DIRECTIVES LICENSING AND SUPERVISION OF INSURANCE BUSINESS

Abrham Yohannes Hailu

Law Teacher at Haramaya University

College of Law

Licensed Lawyer

Federal and Harari Courts

E-mail: [email protected]

Mobile: +251913388259

+251915742253

Blog: www.chilot.me

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CONSOLIDATED NATIONAL BANK of ETHIOPIA DIRECTIVES

LICENSING AND SUPERVISION OF INSURANCE BUSINESS

Table of Contents

DIRECTIVE PAGE SIB/1/1994 LICENSING AND SUPERVISION OF INSURANCE BUSINESS

2 SIB/6/1994 INVESTIGATION FEE TO BE PAID BY INSURANCEAUXILIARIES AND ACTUARIES

15 SIB/8/1995 AMENDMENT OF OPENINGOF BRANCHES

15 SIB/009/95 INSURANCE BROKERS CODE OF CONDUCT

17 SIB/11/1996 LICENSING OF INSURANCE ACTUARY

21 SIB/12/1996 INSURANCE BUSINESS LICENSING OF INSURANCE LOSSASSESSORS AND LOSS ADJUSTORS

22 SIB/17/98 Manner of Reporting Financial Information

24 SIB/18/98 Amendment of Licensing of Insurance Agent

28 SIB/19/98 Sanctions against Failure to Maintain Renewed Business License and Professional Indemnity Insurance Policy

31 SIB/21/2001 Amendment of Licensing of Insurance Broker

33 SIB/22/2002 Licensing of Insurance Surveyors

35

SIB/24/2004 Amendment of PROHIBITION OF ISSUANCE OF CERTIAN TYPES OF BONDS BYINSURANCE COMPANIES

37 SIB/25/2004 INVESTMENT OF INSURANCE FUNDS

40 SIB/26/2004 MANNER OF COMPUTING MARGIN OF SOLVENCY FOR INSURANCECOMPANIES

46 SIB/27/2004 Amendment of FINE FOR NON-COMPLIANCE WITH THE DIRECTIVES OF THE NATIOAL BANK OF ETHIOPIA

48 SIB/28/2004 EMERGENCY TRAVEL HEALTH INSURANCE

50 SIB/28/2004 LICENSING OF INSURNACE BROKER

52 SIB/30/2007 LICENSING OF INSURANCE AGENT

57 SIB/31/2010 LICENSING OF INSURANCE BROKERS

64 SIB/1/1994 LICENSING AND SUPERVISION OF INSURANCE BUSINESS

TOSHIBA

Cross-Out

1

¾›=ƒÄåÁ wN?^© v”¡ NATIONAL BANK OF ETHIOPIA

ADDIS ABABA

TELAGRAPHIC ADDRESS PLEASE ADDRESS ANY REPLY TO

N A T I O N B A N K

TELEX 21020 P.O.BOX 5550

ADDIS ABABA

CODES USED

PETERSON 3rd

& 4th

ED.

BENTLEY’S 2nd

PHRASE

Supervision of Insurance Business

Title Directive

No. Licensing and Supervision of Insurance Business SIB/1/94

Investigation Fee to be paid by Insurance

Auxiliaries and Actuaries

SIB/6/94

Amendment of Opening of Branches SIB/8/95

Insurance Brokers Code of Conduct SIB/9/95

Licensing of Insurance Actuary SIB/11/96

Licensing of Insurance Loss Assessors and Loss

Adjustors

SIB/12/96

Manner of Reporting Financial Information SIB/17/98

Licensing of Insurance Agent SIB/18/98

Sanction against Failure to Maintain Renewed SIB/19/98

Abrham Yohannes Haramaya University College of Law www.chilot.me

Page 1 of 69

TOSHIBA

Cross-Out

2

Business License and Professional Indemnity

Insurance Policy

Amendment of Licensing of Insurance Broker SIB/21/2001

Licensing of Insurance Surveyors SIB/22/2002

Amendment of Prohibition of Issuances of

Certain Types of Bands by Insurance Companies

SIB/24/2004

Investment of Insurance Funds SIB/25/2004

Manner of Computing Margin of Solvency for

Insurance Companies

SIB/26/2004

Amendment of Fine for Non-Compliance with

the Directives of the National Bank

SIB/27/2004

Emergency Travel Health Insurance SIB/28/2004


DIRECTIVE NO. SIB/1/1994

1. Issuing Authority

These Directives are issued by the National Bank of Ethiopia pursuant to the authority vested in it by Article 41 of the

Monetary and Banking Proclamation No. 83/1994 and Article 42 of the Licensing and Supervision of Insurance business

Proclamation No. 86/1994.

2. Definitions


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In these Directives, unless the context provides otherwise:

2.1 "Related parties" shall mean directors, founders, principal officers, employees and other businesses in which they have

direct interest.

2.2 "Residence" shall have the meaning assigned to it under Article 174 of the Commercial Code of Ethiopia.

2.3 "Proclamation" shall mean proclamation to provide for the Licensing and Supervision of Insurance Business No.

86/1994.

3. Information Required From Applicants For License

Along with those provided for under the Proclamation, the following Information shall be contained in any application for a

license to be an insurer.

3.1 Evidence for paid up capital which includes certificate of deposit in a blocked subscription account and evidence for

valuation of contribution in kind.

3.2 Names and occupation (including dates and addresses of previous employment), of the organizers of the company if

these are other than the directors.

3.3 Feasibility study document.


3.4 Projection of Financial statements for the first three years of operation showing major categories of liabilities.

3.5 Disclosure of the identity of shareholders who have acquired more than ten percent of the capital stock indicating their

names, nationality number and value of shares held.

3.6 Separate cost of vault, equipment, furniture and fixture purchased or leased.

3.7 Authenticated ownership certificate and/or lease agreement for items listed under Section 10.1 of the application form.

3.8 Description of any purchase or proposed purchase of goods and services, or lease of real estate by the insurer from

related parties.

3.9 Proposal of insurance coverage and extent of such coverage.


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3.10 Curriculum vitae of the proposed Chief Executive, founders and/or directors including their age, marital status,

education, employment history for the past ten years, their experience in business and financial affairs, their involvement

in civic social and charitable activities including any leadership position held.

3.11 Duly completed application form as prescribed by the Bank and submit enclosures specified therein.

3.12 Proposed organizational chart of the insurer, and brief description of the functions of the main organizational units.

4. Criteria For Selection Of Chief Executive

4.1 Education

A minimum of first degree or equivalent in relevant field acquired from a university or higher institution of learning.

4.2 Experience

A minimum of ten years of reputable managerial experience in insurance or related business.

4.3 Age

A minimum of thirty five years.

4.4 Marital Status

Preferably married or responsible to a family.


5. Criteria for Selection of Members of Board of Directors

5.1 Education


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A minimum completion of high school education with ability to read and grasp contents of reports, especially financial

statements.

5.2 Experience

Member of Board of directors shall have adequate managerial experience in business, and/or similar organizations.

5.3 Age

A minimum of 30 years of age

6. Fees

6.1 A company applying to undertake Insurance Business shall pay investigation fee of Birr1,750.- (Birr one thousand seven

hundred fifty only), that is to be paid at the time of lodging an application.

6.2 A company licensed to undertake insurance business shall pay initial registration fee currently prescribed by the Ministry

of trade for registration of Memorandum and Articles of Association.

6.3 A company licensed to undertake general or long term Insurance Business shall pay initial license and subsequent annual

renewal fee of Birr 2,000.-(Birr two thousand only).

6.4 A company licensed to undertake both general and long term Insurance Business shall pay initial license and subsequent

annual renewal fee of Birr 3,000.- (Birr three thousand only).

These Directives shall enter into force as of Fifteenth day of June 1994.94

1. Name of applicant and Designation__________________________________


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___________________________________________.

2. Proposed Name of the company (under formation) ______________________

___________________________________________.

3. Name of the Spokesperson_________________________________________

Address: ________________________________________

_________________________________________

_________________________________________

4. Address of company, and proposed branches

4.1 Head office Address:

Location_________________________________________________

P.O.Box _________________________

Tel. _____________________________

Telex ___________________________

Fax _____________________________

4.2 Branch Address: (if any)

4.2.1 Location _______________________________________________

Tel. ________________________

P.O.Box _____________________

4.2.2 Location _____________________________________

Tel. _________________________

P.O.Box _____________________

(If there are more than two proposed branches, annex a list in same form).

5. Names and Addresses of the Founders

5.1 Name Nationality Occupation Residence Address Number of

Photo of

Representative

of Applicant


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Shares Held

5.1.1

5.1.2

5.1.3

5.1.4

5.1.5

5.1.6

5.1.7

5.1.8

5.1.9

5.1.10

* (Where the founders are more than ten, annex a list in same form)


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6. Names and Addresses of Members of Board of Directors

6.1 Name Occupation Residence Nationality Address Number of

Shares Held

6.1.1

6.1.2

6.1.3

6.1.4

6.1.5

6.1.6

6.1.7

6.1.8

5.1.9

6.1.10

6.1.11

6.1.12

6.2 (Attach curriculum vitae of each director)


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7. Contributions:

7.1 In cash Birr _________________________________________________

7.2 In kind (specify the type of property and value)

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

8. Initial capital of the Company (in Birr)

8.1 Authorized capital_____________________________________

8.2 Subscribed capital _____________________________________

8.3 Paid up capital ________________________________________

9. Shares

9.1 Number of shares issued _____________________________________

9.1.1 Number of shares held by founders ____________________

9.1.2 Number of shares held by subscribers__________________

9.2 Par value of each share in Birr ________________________________


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10. Provide the following information with respect to:

10.1 Cost of premises' equipment and others where purchased or leased

by the applicant.

Item Manner of

Acquisition

Cost

Building

Land

Vault

Equipment

Fixture

Professional Services

Total

10.2 Indicate if any of these items are leased or to be leased or purchased or to

be purchased from related parties.

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

____________________________________

* Lease, purchase, rent .......etc.


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10.3 Lease agreement

Description of

Premises

Leased or to be

Leased

Terms of

Lease

Expiry Date

11. Types and extent of the company's proposed insurance coverage

________________________________________________________________

____________________________________________________________

____________________________________________________________

____________________________________________________________

________________________________________________________

12. Name and Address of Insurer's actuary; if any

________________________________________________________________

________________________________________________________

13, Name and addresses of reinsures

________________________________________________________________

________________________________________________________


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14. Identify the main class or classes of Insurance to be undertaken

Long term General

{ } { }

15. If general insurance business is to be undertaken, identify the class or classes.

15.1 Accident and Health _______________

15.2 Motor Vehicles ________________

15.3 Aircraft damage and liability ________________

15.4 Ship damage and liability ________________

15.5 Goods in transit _________________

15.6 Property damage _________________

15.7 Pecuniary loss ________________

15.8 General liability ________________

Others (Specify) _____________________

_____________________

16. Give statements that Board of Directors and the Chief Executive are vetted to

fulfill requirements stated under Article 33 of Proclamation 86/1994.

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________


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17. Any other statement

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

__________________________________________________________________

18. Under pain of penalty provided under Article 41 of the Proclamation, I

hereby declare that the above particulars and the information provided in the

enclosure attached are true and correct and undertake to notify the Bank of

any material alteration in the information and particulars in accordance with

Article 35 of the Proclamation.

Date________________________ Signature ____________________

Name and Official Designation

of the Applicant


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The following particulars are attached here to:

ENCLOSURES

1. Four authenticated copies of the Memorandum and Articles of Association by which

the Company is constituted.

2. Four copies of bank certificates of deposit for contributions in cash held in

subscription blocked account.

3. Four copies of valuation evidence for capital contribution in kind.

4. Two copies of feasibility study documents.

5. Two copies of projected Financial statements for the first three years of operation.

6. Two copies of authenticated ownership certificate for items listed under Section

10.1 of the application form.

7. Two copies of evidence of insurance coverage for premises already acquired or

leased.

8. Four copies of curriculum vitae of Chief Executive officer, founders and/or members

of Board of Directors.

9. One copy of evidence of payment of investigation fee.

10. Two copies of organizational chart of the proposed insurance company and

description of functions of main organizational units.

11. Four passport size photographs of the official designate who applies for the license

on behalf of the Company.

12. Two copies of disclosure of the identity of share holders who have acquired more

than ten percent of the Capital stock, indicating their names, nationality, number and

value of shares held.

13. Two copies of each form of insurance policy together with endorsements and

proposal forms which the company proposes to issue.

14. Four copies of schedules of latest premium rates and commissions payable for all

classes of business transacted.

15. Four copies of list of all agents and brokers to whom commission is payable.


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LICENSING AND SUPERVISION OF

INSURANCE BUSINESS

INVESTIGATION FEE TO BE PAID BY INSURANCE

AUXILIARIES AND ACTUARIES


1. ISSUING AUTHORITY

Theses Directives are issued by the National Bank of Ethiopia pursuant to the

Authority vested in it by Article 41 of the Monetary and Banking Proclamation

No. 83/1994 and by Article 25 of the Licensing and Supervision of Insurance

Business Proclamation No. 86/1994.

2. INVESTIGATION FEE

An applicant applying for a license to undertake a business as an insurance

auxiliary or an actuary shall pay investigation fee of Birr 300 (three hundred) to

the National Bank of Ethiopia.

These directives shall enter into force as of 3rd

day of November 1994.


INSURANCE BUSINESS

AMENDMENT OF OPENING

OF BRANCHES




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These Directives amending Directives No. SIB/2/1994 are issued by the

National Bank of Ethiopia pursuant to the authority vested in it by Article

41 of the Monetary and Banking Proclamation No. 83/1994 and by Article

41 of the Monetary and Banking Proclamation No. 83/1994 and by Article 25 of

the Licensing and Supervision of Insurance Business Proclamation No. 86/1994.

2. Amendment

The National Bank of Ethiopia Licensing and Supervision of Insurance

Business Directive No. SIB/2/1994 is hereby amended as follows.

"4. Duty of the Bank

The Bank shall give a written response to the applicant within thirty

calendar days from the date of receipt of the application and

feasibility study under Article 3 hereof.

./.

¾›=ƒÄåÁ wN?^© v”¡¾›=ƒÄåÁ wN?^© v”¡¾›=ƒÄåÁ wN?^© v”¡¾›=ƒÄåÁ wN?^© v”¡

NATIONAL BANK OF ETHIOPIA

PAGE 2

5. Fee

An insurer licensed to open a branch shall pay Birr 500.00 (Five Hundred

Birr) for each licensed branch."

These Directives shall enter into force as of 22nd day of May 1995.


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INSURANCE BROKERS CODE OF CONDUCT


1. Short Title

This Directive may be cited as The Insurance Brokers Code of conduct Directive No.

SIB/011/1995


These Directives are issued by The National Bank of Ethiopia pursuant to the Authority

vested in it by Article 41 of the Monetary and Banking Proclamation No. 83/1994 and by

Article 42 (j) of the Licensing and Supervision of Insurance Business Proclamation No.

86/1994.

3. Definition

(a) 'Insurance Broker' shall mean a person duly licensed as Insurance

Broker in accordance with directive No. SIB/3/1994;

(b) 'Insurer' means a person or body of persons carrying on Insurance

business;

(c) 'Advertisements' or 'Advertising' means canvassing, the offer of

services or other methods whereby business is sought by Insurance

Brokers.

1. This Code of Conduct shall serve as a guide to Insurance Brokers and other

persons concerned with their conduct but the mention or lack of mention in it

of a particular act or omission shall not be taken as conclusive of any question

of professional conduct.

The objective of this Directive is to assist in establishing a recognized

standard of professional conduct required of all Insurance Brokers who

should, in the interests of the public and in the performance of their duties,

bear in mind both this objective and the underlying spirit of this Code. ¾›=ƒÄåÁ wN?^© v”¡ NATIONAL BANK OF ETHIOPIA

Matters which might relate to acts or omissions amounting to negligence will

be dealt with, if necessary, by the Courts but the Bank acknowledges that

gross negligence or repeated cases of negligence may amount to

unprofessional conduct.

2. The following are, in the opinion of the Bank, the acts and omissions which, if

done or made by Licensed Insurance Brokers constitute unprofessional


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conduct: namely any acts or omissions that breach the fundamental principles

governing the professional conduct of Insurance Brokers set out in paragraph

3 below.

3. The principles mentioned in paragraph 2 above are as follows:

A. Insurance Brokers shall at all times conduct their business with utmost

good faith and integrity;

B. Insurance Brokers shall do everything possible to satisfy the insurance

requirements of their clients and shall place the interests of those clients

before all other considerations. Subject to these requirements and interests,

Insurance Brokers shall have proper regard for others;

C. Statements made by or on behalf of Insurance Brokers when advertising

shall not be misleading or extravagant.

The following are some specific examples of the application of these principles:

(1) In the conduct of their business Insurance Brokers shall

provide advice objectively and independently.

(2) Insurance Brokers shall only use or permit the use of the

description 'Insurance Broker' in connection with a business

provided that business is carried on in accordance with the

requirements of Proclamation No. 86/1994 Art.2(11).

(3) Insurance Brokers shall ensure that all work carried out in

connection with their insurance broking business shall be under the

control and day-to-day supervision of a Managing partner and he

shall do everything possible to ensure that employees are made

aware of this Code.

(4) Insurance Brokers shall on request from the client explain the

differences in and the relative costs of, the principal types of

insurance which in the opinion of the Insurance broker might suit a

client's needs. ¾›=ƒÄåÁ wN?^© v”¡ NATIONAL BANK OF ETHIOPIA

(5) Insurance Brokers shall ensure the use of sufficient number

of insurers to satisfy the insurance requirements of their clients.

Sufficient number of insurers shall mean more than for 50% of the

license insurer.

(6) Insurance Brokers shall, upon request, disclose to any client

who is, or is contemplating becoming, the holder of a policy of


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insurance the amount of commission paid or to be paid by the

insurer under any relevant policy of insurance.

(7) Insurance Brokers shall not withhold from the policy holder

any written evidence or documentation relating to the contract of

insurance without adequate and justifiable reasons being disclosed

in writing and without delay to the policy holder. If an Insurance

Broker withholds a document from a policy holder by way of a lien

for monies due from that policy holder he shall provide the reason

in the manner required above.

(8) Insurance Brokers shall inform a client of the name of all

insurers with whom a contract of insurance is placed. This

information shall be given at the inception of the contract and any

charges thereafter shall be advised at the earliest opportunity to the

client.

(9) Before any work involving a charge is undertaken or an

agreement to carry out business is concluded, Insurance Brokers

shall disclose and identify any amount they propose to charge to

the client or policy holder which will be in addition to the premium

payable to the insurer.

(10) Insurance Brokers shall disclose to a client any payment

which they receive as a result of securing on behalf of that client

any service additional to the arrangement of a contract of

insurance.

(11) Insurance Brokers shall have proper regard for the wishes of

a policy holder or client who seeks to terminate any agreement with

them to carry out business.

(12) Any information acquired by an Insurance Broker from his

client shall not be used or disclosed except in the normal course of


Page 19 of 69

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(13) negotiating, maintaining, or renewing a contract of insurance

for that client or unless the consent of the client has been obtained

or the information is required by a court of competent jurisdiction.

(14) In the completion of the proposal form, claim form, or any

other material document, Insurance Brokers shall make it clear that

all the answers or statements are the client's own responsibility.

The client should always be asked to check the details and told that

the inclusion of incorrect information may result in a claim being

repudiated.

(15) Advertisements made by or on behalf of Insurance Brokers

shall be restricted to contractual benefits only.

(16) When advertising their services directly or indirectly either in

person or in writing Insurance Brokers shall disclose their identity,

occupation and purpose before seeking information or before

giving advice.

(17) Insurance Brokers shall display in any office where they are

carrying on business and to which the public have access a notice

to the effect that a copy of the Code of Conduct is available upon

request and that if a member of the public whishes to make a

complaint or requires the assistance of the Bank in resolving a

dispute he may wire to:

National Bank of Ethiopia

P.O.Box 5550

Fax No. 51-45-88

Telex No. 21020

Addis Ababa

These Directive shall come into force as of 17th day of November 1995.

November 16, 1995


INSURANCE BUSINESS

LICENSING OF INSURANCE ACTUARY


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DIRECTIVE No. SIB/11/1996


These Directives are issued by the National Bank of Ethiopia pursuant to the

authority vested in it by Article 41 of the Monetary and Banking Proclamation No.

83/1994 and by Article 25 of Licensing and Supervision of Insurance Business


2. Requirements

An applicant for a license:

2.1 has to be an Ethiopian national;

2.2 must not have been convicted of an offence involving dishonesty or fraud,

whether in Ethiopia or elsewhere; and

2.3 should maintain a professional indemnity insurance cover or produce property

guarantee for Birr100,000.= (one hundred thousand Birr).

3. Qualifications

An applicant should hold a degree/diploma from

3.1 Institute of Actuaries (London); or

3.2 Faculty of Actuaries (Scotland); or

3.3 Society of Actuaries (U.S.A); or

3.4 Degree or diploma acquired from professional institution with similar status.

4. An Actuary licensed outside Ethiopia may engage in actuarial valuation business

provided he/she is authorized to do so by the Bank.

5. Fees

A person applying for a license to be an Actuary shall pay investigation fee of

Birr300.= (three hundred Birr) and initial license and subsequent annual renewal

fee of Birr250.= (Two hundred fifty Birr).

6. Other Requirements

An applicant shall submit;


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6.1 name and occupation (including dates and addresses of previous

emplomyment);

6.2 four passport size photographs;

6.3 curriculum vitae and

6.4 duly completed application from as prescribed by the Bank and enclosures

specified therein.

These Directives shall enter into force as of 8th

day of April 1996.

April 5, 1996


INSURANCE BUSINESS

LICENSING OF INSURANCE LOSS

ASSESSORS AND LOSS ADJUSTORS

DIRECTIVE No. SIB/12/1996



authority vested in it by Article 41 of the Monetary and Banking Proclamation

No. 83/1994 and Article 25 of the Licensing and Supervision of Insurance


2. Requirements

An applicant for a license:

2.1 has to be an Ethiopian national;

2.2 must not have been convicted of an offence involving dishonesty or fraud,

whether in Ethiopia or elsewhere; and

2.3 maintain a professional indemnity insurance cover or produce property

guarantee for Birr 100,000.= (One hundred thousand Birr).

3. Qualifications

3.1 Loss Assessor

An applicant should hold a diploma in the field from institutions acceptable by

the Bank and sufficient experience in the profession he is applying for.


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3.2 Loss Adjustor

An applicant should hold a diploma from the Chartered Institute of Loss

Adjustors or institutes with similar status who provide professional qualification

in loss adjusting.

4. Business Organization

If the applicant is a partnership it has to be organized in the form of unlimited

liability, and the managing partner should meet the requirements provided for under

sections 3.1 or 3.2 heretofore.

5. Loss Assessors or Loss Adjustor Licensed Outside Ethiopia

Loss Assessor or Loss Adjustor licensed outside Ethiopia may engage in loss

assessing or adjusting business provided he/she is authorized to do so by the

Bank.

6. Fees

A person applying for a license to be Loss Assessor or Loss Adjustor shall pay

investigation fee of Birr300.= (Three hundred Birr) and initial license and subsequent

annual renewal fee of Birr250.= (Two hundred fifty Birr).


An applicant shall submit:

7.1 name and occupation (including date and addresses of previous employment);

7.2 four passport size photographs;

7.3 curriculm vitae; and

7.4 duly completed application form as prescribed by the Bank and enclosures

specified therein .


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These Directives shall enter into force as of 8th

day of April 1996.

April 5, 1996


INSURANCE BUSINESS

Directive No. SIB/17/98

Manner of Reporting Financial Information




No. 83/1994 and by Article 42(j) of the Licensing and supervision of Insurance


2. SUBMISSION OF REPORTS

Each insurer shall submit to the Supervision Department of the National Bank of

Ethiopia separate quarterly reports for general and long-term insurance business

within twenty days after the end of each quarter in the manner shown in the return

formats attached herewith which shall form a part hereof.

3. DEFINITIONS

1. General Insurance Business

For the purpose of reporting financial information:

(a) Aviation Insurance Business shall mean the business of

effecting and carrying out contracts of insurance:

i) upon the aircraft or upon the machinery, tackle or

furniture or equipment of aircraft;

ii) against damage arising out of or in connection with the

use of aircraft or against risks incidental to construction, repair or

landing of aircraft, including airport owners' liability and third party

risks;


Page 24 of 69

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iii) against loss of life by accident or injury by accident to

aircrew members whilst performing or deemed to be performing

their duties in accordance with their employment but excluding contracts of

insurance in respect of risks of aviation excess of loss or crew loss of

license. ¾›=ƒÄåÁ¾›=ƒÄåÁ¾›=ƒÄåÁ¾›=ƒÄåÁ wN?^© v”¡ wN?^© v”¡ wN?^© v”¡ wN?^© v”¡ NATIONAL BANK OF ETHIOPIA

(b) Engineering Insurance Business shall mean the business of

effecting and carrying out contracts of insurance of various perils arising

out of plant and machinery, such as explosion or collapse of boilers,

breakdown of electrical or mechanical plant and lifts and cranes

Machinery Break Down (MBD), and resultant damage to the insured's

surrounding property and liability to third parties arising therefrom; it

shall also include contracts of insurance in respect of Contractors' All

Risks (CAR), Erection All Risks (EAR) and Machinery Break Down

(MBD) and damage to property on site however caused and third party

liability arising therefrom.

c) Fire Insurance Business shall mean the business of effecting and

carrying out of contracts of insurance other than those incidental to some

other class of insurance business, against loss of or damage to property

due to fire, explosion, storm, flood, and other occurrences customarily

included among the risks insured against in fire insurance polices; it

shall also include burglary, glass, all risks, householder's insurance.

d) Liability Insurance Business shall mean the business of effecting

and carrying out contracts of insurance against risks of persons insured

incurring liabilities to third parties, not being risks arising out of, or in

connection with the use of motor vehicles or out of, or in connection

with the use of, vessels or aircraft or risks incidental to the construction,

repair or docking of vessels or aircraft.

e) Marine Insurance Business shall mean the business of effecting

and carrying out contracts of insurance:-

i) upon vessels or upon the machinery, tackle, furniture or equipment of

vessels;

ii) upon goods, merchandise or property of any description on board

of vessels;

iii) upon the freight of, or any other interest in or relating to, vessels;

iv) against liability arising out of, or in connection with, the use of

vessels;

v) against risks incidental to the construction, repair or docking of

vessels, including third-party risks;


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vi) against transit risks (whether the transit is by sea, inland, water,

land or air, or partly one and partly another), including risks

incidental to the transit insured from the commencement of the

transit to the ultimate destination covered by the insurance; or

¾›¾›¾›¾›=ƒÄåÁ wN?^© v”¡=ƒÄåÁ wN?^© v”¡=ƒÄåÁ wN?^© v”¡=ƒÄåÁ wN?^© v”¡ NATIONAL BANK OF ETHIOPIA

vii) against any other risks which are customarily undertaken in

conjunction with, or as incidental to, the undertaking of such

business as falls within this definition.

f) Motor Insurance Business shall mean the business of effecting

and carrying out contracts of insurance against loss of, or damage to, or

arising out of or in connection with the use of, motor vehicles, inclusive of

third-party risks but exclusive of transit risks.

g) Accident and Health Insurance Business shall mean the business

of effecting and carrying out contracts of insurance against risks of the

persons insured sustaining injury as the result of an accident or an accident

of a specified class or dying as the result of an accident or of an accident

of a specified class or becoming incapacitated in consequence of diseases

or of disease of a specified class, not being contracts of long-term

insurance business.

h) Pecuniary Insurance Business shall mean the business of

effecting and carrying out contracts of insurance against loss of or damage

to property due to theft or any other cause not covered under any other

class and shall include the insurance of cash in transit, fidelity guarantee,

all risks, bonds and credit.

i) Workmen's Compensation Insurance Business shall mean the

business of effecting and carrying out contracts of insurance against the

liability of the employer to the employees in respect of any injury or

disease arising out of and in the course of their employment.

j) Other Insurance Business shall mean the business of effecting

and carrying out contracts of insurance which are not principally or wholly

of any type or types included in the preceding classes of business but shall

include insurance of livestock and crop insurance.

2. Long-term Insurance Business



Page 26 of 69

27

a)Industrial Life Assurance Business shall mean the business of effecting

assurances on human life, premiums in respect of which are payable, at

intervals, to collectors sent by the insurer to each holder of a policy or to his

residence or place of work.

¾›=ƒÄåÁ wN?^© v”¡¾›=ƒÄåÁ wN?^© v”¡¾›=ƒÄåÁ wN?^© v”¡¾›=ƒÄåÁ wN?^© v”¡ NATIONAL BANK OF ETHIOPIA

b ) Ordinary Life Assurance Business shall mean life assurance business,

being business of, or in relation to, the issuing of or the undertaking of

liability under ordinary life polices. Ordinary life policy means a policy of

life assurance other than a policy of industrial life assurance.

a) Superannuation Business shall mean life

assurance business, being business of, or in relation to, the issuing of or

the undertaking of liability under superannuation, group life and

permanent health insurance polices:

i) that is vested in the trustees of a fund established or

maintained by a person, being a fund the terms and conditions

applicable to which provide for:

the payment of contributions to the fund by that person; and

Payments being made from the fund, on account of injury, sickness, retirement or

death of the employees of that person or a company in which that person has

a controlling interest; or

ii) that was:

effected for the purposes of a superannuation or retirement scheme; or

accepted by the person maintaining such a scheme for the purpose of the scheme.

4. SPECIFIC PRESCRIPTIONS


1. The inception date, i.e. the date on which liability of an insurer begins

under a contract of insurance, shall be the date for recognition of premiums.

Where an insurance contract provides permanent open cover, each

anniversary date of the contract shall be deemed the inception date.

2. Premiums shall be shown net of discounts, refunds and rebates.

3. Amounts of commission which may include brokerage fee or other

remuneration paid to intermediaries shall be separately shown under

appropriate headings and shall not be deducted from premium amounts.

4. Claims amounts shall include claims expenses and provisions for

outstanding claims shall include provisions for Incurred But Not Reported

(IBNR) claims.


Page 27 of 69

28

5. Premiums, claims, surrenders, annuities and commissions shall be

shown net of reinsurance transactions related thereto.

6. Reserves for Unearned Premiums in respect of each class of general

insurance business shall be computed on the basis of the one-twenty fourth

method. ¾›=ƒÄåÁ wN?^© v”¡¾›=ƒÄåÁ wN?^© v”¡¾›=ƒÄåÁ wN?^© v”¡¾›=ƒÄåÁ wN?^© v”¡ NATIONAL BANK OF ETHIOPIA

7. Reserves for Incurred But Not Reported (IBNR) claims in respect of

each class of general insurance business shall be 10% (ten percent) of net

earned premium.

8. where an asset which is encumbered is included in the balance sheet,

particulars of such an asset, the nature of the encumbrance and the amount

secured by the encumbrance shall be attached to the balance sheet.

9. Particulars of all contingent liabilities other than liabilities under

contracts of insurance shall be attached.

5. REPORTING PERIOD

For the purpose of reporting financial information,

First Quarter shall mean the period running from July 1 to September 30,

Second Quarter shall mean the period running from October 1 to December 31,

Third Quarter shall mean the period running from January 1 to March 31,

Fourth quarter shall mean the period running from April 1 to June 30 of each

financial year.

6. EFFECTIVE DATE

These Directives shall be effective as of the 11th day of May 1998.


INSURANCE BUSINESS


Amendment of

Licensing of Insurance Agent



Page 28 of 69

29



83/1994 and by Article 25 of the Licensing and Supervision of Insurance Business


2. Requirements

2.1 Where the applicant is a natural person:

a) He/She has to be an Ethiopian national and should at least have

completed secondary level of education and have sufficient

experience and/or training in insurance business;

b) Where an applicant has sufficient training in insurance and/or has

served as an insurance sales agent for at least 7(seven) years but

cannot produce evidence of completion of secondary level of

education for reasons acceptable to the Bank, the National Bank of

Ethiopia may waive the requirement for such evidence.

c) He/She has not been convicted by court of law in any country for an

offense involving dishonesty.

2.2 Where an application is made:

a) to obtain a license to carry on business as a general insurance agent,

the agent shall deposit Birr 20,000:- (Twenty Thousand) with the

NBE or shall produce a property of value not less than the said

amount or shall maintain a professional indemnity insurance cover of

Birr 20,000:- (Twenty Thousand);

b) to obtain a license to carry on business as life insurance agent, the

principal insurer shall deduct 10% (Ten Percent) of the commission

paid to the agent and transfer the balance with a statement thereon to

the NBE within five days after the end of every quarter until such

amount reaches the sum of Birr 20,000.- (Twenty Thousand) or the

life insurance agent shall produce a property of value not less than

the said amount or shall maintain a professional indemnity insurance

cover of Birr 20,000.- (Twenty Thousand);


Page 29 of 69

30

c) to obtain a license to carry on business as both general and life

insurance agent, the agent shall deposit with the NBE Birr 40,000

(Forty Thousand) or maintain a professional indemnity insurance

cover of Birr 20,000 (Twenty Thousand) in respect of each main line

of insurance agency business.

2.3 Where the applicant is a juridical person:

a) It has unlimited liability;

b) It has its head office in Ethiopia and fully owned by Ethiopian

nationals;

c) The Chief Executive of the agency should at least meet the

education, experience and other requirements provided for under

article 2.2 hereof.

Training

3.1 Training offered by licensed and existing insurers prior to August, 1996, for

their prospective insurance agents is acceptable by the Bank where issued

certificate is accompanied by a trainee's copy indicating course offered and

credit hours assigned to each course.

3.2 For the purpose of application of sub article 3.1 of this section 3, the

concerned Insurance Company shall submit the list of courses offered along

with credit hours assigned to each course, names and profiles of instructors

of the said courses.

3.3 Beginning from August 1996, unless it is provided otherwise by the Bank's

Directives, recognition is given only to the training offered to insurance sales

agents by the Ethiopian Institute of Banking and Insurance or institutions

engaged in similar training activities acceptable to the National Bank of

Ethiopia.

3.4 Insurers shall provide a minimum of 30 hours of refresher course every year

to their licensed agents.

4. Fees

A person applying for a license to carry on business as an insurance agent shall pay

initial license and subsequent annual renewal fees of Birr 250.-(Two Hundred Fifty).


Page 30 of 69

31


An applicant for a license to be an insurance agent shall submit to the Bank:

5.1 name and occupation (including date and address of previous employment);

5.2 four passport size photographs of the applicant or the chief executive as the

case

may be;

5.3 curriculum vitae of the agent; and

5.4 duly completed form as prescribed by the Bank and submission of

enclosures specified therein.

6. Repeal

Directives No. SIB/4/1994, SIB/13/1996 and SIB/15/1997 are hereby repealed and

replaced by these Directives.

These Directives shall enter into force as of the 1st day of August 1998.


INSURANCE BUSINESS


Sanctions against Failure to Maintain Renewed

Business License and Professional Indemnity

Insurance Policy


These Directives are issued by the National Bank of Ethiopia (hereinafter called “the

Bank”) pursuant to the authority vested in it by Article 41 of the monetary and


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32

Banking Proclamation No. 83/1994 and Article 42(j) of the Licensing and

Supervision of Insurance Business Proclamation No. 86/1994.

2. Definition

An “Insurance Auxiliary” shall mean an insurance agent, insurance broker, loss

adjuster, loss assessor or insurance surveyor.

3. Penalty for Failure to Apply for Renewal of Business License

3.1 Any insurance company that fails to apply for the renewal of its business

license within one month after the expiry date of such license shall be subject

to a fine of Birr 500 (Five hundred Birr).

3.2 Any insurance auxiliary or actuary that fails to apply for the renewal of the

business license within one month after the expiry date of such license shall

be subject to a fine of Birr 150 (One hundred fifty Birr).

4. Sanction against Failure to Maintain Valid Professional Indemnity Insurance

Policy

4.1 The Bank shall cancel the license of any insurance auxiliary or actuary who

fails to maintain valid Professional Indemnity Insurance Policy at all times.

4.2 For the purpose of ensuring compliance with the requirement of sub-article

4.1 of this article, an insurance auxiliary or actuary shall promptly file with

the Bank a Copy of the valid Professional Indemnity Insurance Policy upon

its renewal.

4.3 Sub-article 4.1 of this article does not apply to insurance auxiliaries who

hold deposits with the Bank or have pledged property as guarantee.

5. Waiver

The Bank may waive the sanction specified under sub-article 4.1 hereinabove on

grounds it considers to be acceptable.

6. Effective Date


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33

These Directives shall be effective as of the 1st day of August 1998.

LICENSING AND SUPERVISION OF INSURANCE BUSINESS Directive No. SIB/21/2001 Amendment of Licensing of Insurance Broker


These Directives are issued by the National Bank of Ethiopia pursuant to

the authority vested in it by Article 41 of the Monetary and Banking

Proclamation No. 83/1994 and by Article 25 and 42(j) of the Licensing and

Supervision of Insurance Business Proclamation No. 86/1994.

2. DEFINITION

2.1. "The Bank" shall mean the National Bank of Ethiopia.

2.2. "Managerial Position", for the purpose of these directives, shall

mean the position of an insurance company branch manager or

above that involves directly transacting insurance business in all or

several classes.


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34

2.3. "Broker" will take the meaning given to it under proclamation

No.86/94 article 11.

3. REQUIREMENTS FOR FIRMS

In order to be licensed as a broker, the applicant shall meet the following

conditions:

3.1. it shall have an unlimited liability and shall be fully owned by

Ethiopian nationals;

3.2. it shall maintain a professional indemnity insurance cover for

Birr100,000(one hundred thousand Birr);

3.3. the firm shall be organized as a General Partnership;

3.4. the chief executive officer of the firm shall:-

3.4.1. hold a diploma or above in insurance or business related

fields from an institute, a college or university acceptable to

the Bank;

3.4.2. have a minimum of eight years work experience in the

organizational units of an insurance company that directly

transact insurance business in all or several classes, of which

four years should be in managerial position.


INSURANCE BUSINESS


Page 34 of 69

35

Licensing of Insurance Surveyors



These Directives are issued by the National Bank of Ethiopia (the Bank) pursuant

to the authority vested in it by Article 41 of the Monetary and Banking

Proclamation No. 83/1994 and by Article 25 of the Licensing and Supervision of

Insurance Business Proclamation No. 86/1994.

2. DEFINITION

"Insurance Surveyor" or "Surveyor" will take the meaning given to it under

Article 14 of Proclamation No. 86/1994.

3. REQUIREMENTS

3.1 Where the applicant is a natural person, he/she:

a) has to be an Ethiopian national;

b) must not have been convicted of an offense involving dishonesty or fraud,

whether in Ethiopia or elsewhere;

c) should maintain a professional indemnity insurance cover or produce

property guarantee of Birr50,000 (Fifty Thousand Birr);

d) should at least have a diploma from a poly-technique or similar institute in

the profession he/she is applying for ; and

e) should have a diploma in insurance from recognized insurance institute

and/or at least have seven years relevant experience in insurance,

specifically, in underwriting and claims.

3.2 Where the applicant is a juridical person:

a) it shall be organized as a general partnership;

b) it shall be fully owned by Ethiopian nationals;

c) it shall maintain a professional indemnity insurance cover or produce

property guarantee of Birr50,000.- (Fifty Thousand Birr);


Page 35 of 69

36

d) the Chief Executive Officer of the firm:

I. should at least have diploma from poly-technique or similar

institute in the profession he/she is applying for; and

II. should have a diploma in insurance from recognized insurance

institute and/or at least seven years relevant experience in

insurance, specifically, in underwriting and claims.

4. PROHIBITIONS

An applicant for an insurance surveyor shall not have any equity interest in any

insurance company, broking firm, and loss adjusting or loss assessing firm.

5. FEES

An applicant for a license shall pay initial license and subsequent annual renewal fee

of Birr500.- (Five Hundred Birr).

6. INFORMATION REQUIRED FROM APPLICANTS

An applicant shall submit:

6.1 name and occupation (including dates and addresses of previous employment);

6.2 four passport size photographs of the applicant or the proposed Chief Executive

Office;

6.3 curriculum vitae of the applicant or the proposed Chief Executive Officer;

6.4 duly completed application form as prescribed by the Bank and enclosures

specified therein.

7. REPEAL

Dirctive No. SIB/10/1996 is hereby repealed and replaced by this Directive.

8. EFFECTIVE DATE

This Directive shall enter into force as of 1st day of June 2002.



Amendment of

PROHIBITION OF ISSUANCE OF CERTIAN TYPES OF BONDS BY

INSURANCE COMPANIES


Page 36 of 69

37

Whereas insurance companies in Ethiopia offer Financial guarantee Bonds and other

Unconditional Bonds as one of their products to cover losses that may arise as a result of

failure of an obligor to settle in full financial obligations;

Whereas the basis on which such bonds are issued (physical collateral or financial

standing of the borrower) are not well suited to insurers to serve them as adequate safe

guards against losses;

Whereas there is no reliable and readily available reinsurance arrangement for such

bonds;

Now, therefore, in order to prevent possible losses that insurers may suffer as a result of

issuing Financial Guarantee Bonds and other Unconditional Bonds, the National Bank of

Ethiopia has issued the following directives in line with the powers vested in it by Article

42 (j) of the Licensing and Supervision of Insurance Business Proclamation No. 86/1994.


1. Definitions

For the purpose of these directives:

1.1 "Bank" shall mean the National Bank of Ethiopia;

1.2 "Aggregate Exposure" shall mean the maximum potential financial

liability of an insurance company to beneficiaries arising from the

issuance of Financial Guarantee Bonds and Unconditional Bonds by the

insurance company;

1.3 "Financial Guarantee Bond" shall mean a bond payable on demand

issued by an insurance company obliging such insurance company to pay


Page 37 of 69

38

to a lending bank or another creditor or supplier all outstanding claims

arising from non-payment by principal debtor or debtors;

1.4 "Unconditional Bond" shall mean a bond other than Financial Guarantee

Bond issued by an insurance company that is payable to the beneficiary on

demand, without any pre-conditions attached to such payment.

2. Prohibition

2.1 Insurance companies are prohibited from issuing a Financial Guarantee

Bond, by whatever name it may be referred to, in any form whatsoever;

2.2 Insurance Companies are prohibited from issuing any Unconditional

Bond, by whatever name it may be referred to.


3. Treatment of Financial Guarantee Bonds and Unconditional Bonds Issued

and Outstanding Before the effective Date of these Directives

3.1 Financial Guarantee Bonds or Unconditional Bonds issued by insurance

companies and outstanding as of the effective date of these directives shall

be withdrawn upon expiry or shall be phased out by December 31, 2005;

3.2 Notwithstanding what is stated under 3.1 herein above, Financial

Guarantee Bonds or Unconditional Bonds whose originally set expiry

dates extend beyond December 31, 2005 as of the effective date of these

directives shall be withdrawn upon expiry;

3.3 Insurance companies shall hold minimum provisions for Financial

Guarantee Bonds and/or Unconditional Bonds in the following manner:


Page 38 of 69

39

(a) All premiums written on Financial Guarantee Bonds and/or Unconditional

Bonds outstanding as of the end of February 2004 shall be kept as provisions

for such bonds until the phase out period for such bonds specified

under 3.1 and 3.2 herein above;

(b) All premiums that may be written as a result of renewal of Financial

Guarantee Bonds and//or Unconditional Bonds between the period end

February 2004 and end-September 2005 shall form part of the

provisions set out under (a) of this sub-article and shall be kept as

provisions until the phase out period for Financial Guarantee Bonds

and Unconditional Bonds specified under 3.1 herein above;

(c) In addition to the provisions stated under (a) and (b) of this sub-article,

insurance companies shall hold, effective end-June 2004, 5% of their

aggregate exposure as provisions until the phase out period specified

under 3.1 and 3.2 herein above:


4. Reporting Requirements

Insurance companies shall submit to the supervision Department of the Bank a

quarterly Report, prepared in the manner as shown in the table attached to these

directives.

5. Repeal

Directive No. SIB/23/2002 is hereby repealed and replaced by these directives.

6. Effective Date


Page 39 of 69

40

These directives shall come into force as of the 1st day of March 2004


INVESTMENT OF INSURANCE FUNDS


Whereas insurance companies mobilize significant financial resources predominantly in

the form of premiums on insurance polices;

Whereas a significant portion of these financial resources is usually invested by insurance

companies in income-earning assets in order to maximize profits;

Whereas such investments can be a source of financial risk for insurance companies as a

result of lack of diversification, illiquidity or adverse safety characteristics and thereby

endanger the solvency of the companies;

Whereas such adverse developments can be reduced by following prudent practices that

give due consideration to diversification, liquidity, safety of investment of insurance

funds;

Now, therefore, the National Bank of Ethiopia has issued these directives pursuant to the


83/1994 and Article 14 (1) of the Licensing and supervision of Insurance Business




Page 40 of 69

41

1. Definitions

For the purpose of these directives,

1.1 "Admitted Assets" shall mean any property, security, item or interest of an

insurance company recorded in the financial statements of the insurance company

but excluding:

(b) premiums that became due to the insurer but remaining unpaid for more than

90 days except in so far as provisions are held against the premiums in the

manner as specified under article 4 of Directive No. SIB/26/2004 or in so far

as the premiums are secured under automatic non-forfeiture conditions

against the surrender value of a life assurance policy;

(c) prepaid expenses;

(d) an asset that is mortgaged or charged for the benefit of a person other than the

insurer to the extent that it is so mortgaged;

(e) intangible assets such as goodwill;

(f) unsecured or, in the opinion of the Bank, inadequately secured loans, if any;

(g) equity share in any other insurance company, if any;

(h) life policy loans in excess of the surrender value of the policy;

(i) assets in excess of limits prescribed by law or directives of the Bank.

1.2 "General Insurance" shall mean all kinds of insurance business other than

long-term insurance business;

1.3 "Long -term Insurance" shall mean insurance business of all or any of the

following classes, namely life insurance business, annuity business, pension

business, permanent health insurance business and, in relation to the insurer,

personal accident and/or sickness insurance business carried on by that insurer

as incidental to any of the businesses first named within this article.



Page 41 of 69

42


1.4 "Real Estate" shall mean buildings constructed or acquired exclusively, or

predominantly, for the purpose of generating income directly and land

acquired exclusively, or predominantly, for construction or development of

facilities for the purpose of directly generating income.

2. Limits on Investment of Insurance Funds

2.1 General Insurance Funds

The General Insurance Funds of an insurance company shall be invested in the manner

prescribed hereunder:

(a) In Treasury Bills and bank deposits not less than 65% of admitted assets;

provided, however, that aggregate bank deposits (checking, savings and time

deposits) held with any one bank shall not exceed 25% of total admitted assets;

(b) In investments in company shares not exceeding 15% of total admitted assets;

(c) In real estate not exceeding 10% of total admitted assets;

(d) 10% of admitted assets in investments of the insurance company's choice.

2.2 Long-term Insurance Funds

The long-term Insurance funds of an insurance company shall be invested in the

following manner:

(b) In Treasury Bills/Bonds and bank deposits not less than, in aggregate, 50% of

total admitted assets; provided, however, that aggregated deposits (checking,

savings and time deposits) held with any one bank shall not exceed 25% of total

admitted assets;

(c) Investments in company shares not exceeding 15% of total admitted assets;



Page 42 of 69

43


(d) Investments in real estate not exceeding 25% of total admitted assets;

(e) 10% of total admitted assets in investments of the insurance company's choice.

3. Compliance Period

3.1 Insurance companies shall be fully in compliance with the limits specified

under 2.1 and 2.2 herein above by the end of June 2005;

3.2 Notwithstanding what is stated under 3.1 of this article, any loans (other than

Treasury bills and Treasury Bonds) extended by insurance companies before

the effective date of these directives that exceed the limits specified under 2.1

and 2.2 herein above shall be withdrawn upon maturity.

4. Reporting Requirement

In order to monitor compliance with the investment limits specified in these directives,

insurance companies shall submit quarterly reports to the Supervision Department of the

National Bank of Ethiopia prepared in the manner as specified in the tables attached to

these directives.

5. Effective Date

These directives shall come into force as of the 1st day of March 2004.



Page 43 of 69

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Insurance Company Investments - General Insurance Business

Name of Insurer: ______________________

Date: ________________________________

Admitted Assets and Types of

Investment

Amount

(million

Birr)

Investments as

Ratio of

Admitted Assets

(%)

Bank Deposits in

a Single Bank as

Ratio of

Admitted Assets

(%)

1. Admitted Assets

xxxxxxxxxx

xxxxxxxxxx

2. Investments:

2.1 Government Securities

and Bank Deposits

2.1.1 Treasury Bills

2.1.2 Bank Deposits (Total)

2.1.2.1 Commercial Bank

of Ethiopia

2.1.2.2. Construction and Business

Bank

2.1.2.3. Awash International Bank

2.1.2.4. Dashen Bank

2.1.2.5. Bank of Abyssinia

2.1.2.6. Wegagen Bank

2.1.2.7. United Bank

2.1.2.8. Nib International Bank

2.1.2.9. Other (specify)

2.2 Others

2.2.1 Company Shares

2.2.2 Real estate

2.2.3 Others (specify)


Page 44 of 69

45



Insurance Company Investments - Long-Term Insurance

Name of Insurer: _____________________

Date: ________________________

Admitted Assets and Types of

Investment

Amount (million Birr)

Investments as

Ratio of

Admitted

Assets

( %)

Bank Deposits

in a Single

Bank as Ratio

of Admitted

Assets

(%)

1. Admitted Assets xxxxxxxxxxxxx xxxxxxxxxxx

2. Investments:

2.1 Government Securities and

Bank Deposits

2.1.1 Treasury Bills

2.1.2 government Bonds

2.1.3 Bank Deposits (total)

2.1.3.1 Commercial Bank of

Ethiopia

2.1.3.2 Construction and

Business Bank

2.1.3.3 Awash International

Bank

2.1.3.4 Dashen Bank

2.1.3.5 Bank of Abyssinia

2.1.3.6 Wegagen Bank

2.1.3.7 United Bank

2.1.3.8 NIB International

Bank

2.1.3.9 Others (specify)

2.2 Others

2.2.1 Shares

2.2.2 Real Estate

2.2.3 Others (specify)


Page 45 of 69

46


MANNER OF COMPUTING MARGIN OF SOLVENCY FOR INSURANCE

COMPANIES





No.83/1994 and by Article 20 (4) and 42 (g) of the Licensing and Supervision of

Insurance Business proclamation No.86/1994.

2. Definitions

For the purpose of these directives,

2.1 “Admitted Assets” shall mean any property, security, item or interest of an

insurance company recorded in the financial statements of the insurance company

but excluding:

(a) Premiums that became due to the insurer but remaining unpaid for more than

90 days except in so far as provisions are held against the premiums in the

manner as specified under article 4 herein below or in so far as premiums are

secured under automatic non-forfeiture conditions against the surrender value

of a life assurance policy;

(b) Prepaid expenses;

(c) An asset that is mortgaged or charged for the benefit of a person other than the

insurer to the extent that it is so mortgaged;

(d) Intangible assets such as goodwill;


Page 46 of 69

47

(e) Unsecured or, in the opinion of the Bank, inadequately secured loans, if any;

(f) Equity share in any other insurance company, if any;

(g) Life policy loans in excess of the surrender value of the policy;

(h) Assets in excess of limits prescribed by law or directives of the Bank.

2.2 “Admitted Liabilities” shall mean all liabilities of an insurance company,

including but not limited to, provisions for (a) outstanding claims (b) incurred but

not reported claims (c) unearned premiums and (d) claims in dispute equivalent to

at least 15% of the aggregate claims in dispute; tax obligations, due to reinsurers,

due to ceding companies, due to other creditors, dividends declared;

2.3 “Bank” shall mean the National Bank of Ethiopia;

2.4 “Margin of Solvency” shall mean the excess of assets over liabilities to be

maintained for General Insurance Business and Long-term Insurance Business.

3. Requirements

An insurance company carrying on General Insurance Business, Long-term Insurance

Business or both shall maintain margin of solvency as specified in article 20 (1-3) of

the Insurance Business Proclamation No. 86/1994 computed in accordance with the

definition of admitted assets and admitted liabilities set out under article 2.1 and 2.2

here in above.

4. Minimum Provision Requirements for Outstanding Trade Debtors' Balances

4.1 An insurance company shall maintain the following minimum provisions for

outstanding trade debtors' balances in respect of General Insurance Business:


Page 47 of 69

48

(a) 25% of the trade debtors' balances outstanding for 91-180 days from the

effective date of the policy;

(b) 50% of the trade debtors' balances outstanding for 181-360 days from the

effective date of the policy;

(c) 75% of the trade debtors' balances outstanding for over 360 days from the

effective date of the policy.

4.2 Insurance companies shall set aside the minimum required provisions specified

under

4.3 here in above in a phased manner as follows:

(a) at least 50% of the required provisions by the end of June 2004;

(b) 100% of the required provisions by the end of June 2005 and thereafter.

5. Reporting Requirement

Insurance companies shall quarterly submit as attachments to their balance sheets

reports showing:

(a) Outstanding trade debtors' balances segregated into aging categories of 91-

180 days, 181-360 days and over 360 days and the amount of provisions

held against the trade debtors' balances;

(b) the asset items listed from (b) to (h) under article 2.1 herein above.

6. Effective Date




Amendment of

FINE FOR NON-COMPLIANCE WITH THE DIRECTIVES OF THE

NATIOAL BANK OF ETHIOPIA


Page 48 of 69

49


These directives are issued by the National Bank of Ethiopia pursuant to the authority

vested in it by Article 41 of the Monetary and Banking Proclamation No. 83/1994 and

Article 26(4) (d) of the Licensing and Supervision of Insurance Business


2. Penalties for Non-compliance

2.1 Any insurance company that fails to comply with the requirements of any of the

directives of the National Bank of Ethiopia shall be subject to a fine of birr 10,000

for each violation;

2.2 Any insurance company that fails to pay to the National Bank of Ethiopia the fine

stated under 2.1 herein above within 5 (five) working days from the date of

receipt of the letter of the National Bank of Ethiopia notifying the concerned

insurance company of the imposition of a fine shall be subject to an additional

penalty of birr200 (two hundred birr) for each day the fine remains outstanding;

2.3 The National Bank of Ethiopia may, in addition to the penalties indicated under

2.1 and 2.2 herein above, take any other measure it considers necessary.

3 Waiver

The National Bank of Ethiopia may waive the penalties on grounds it considers to be

justified.

4 Repeal

Directive No. SIB/14/96 is hereby repealed and replaced by these directives.

5. Effective Date



EMERGENCY TRAVEL HEALTH INSURANCE



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Whereas, the Schengen States of Europe have decided that foreigners planning to travel

to these states shall produce an Emergency Travel Health Insurance Policy as part of the

requirements to obtain entry visa of these states;

Whereas, the Bank is cognizant of the fact that free movement of Ethiopian nationals to

Schengen States should not be hindered by the decision of the States;

Now, therefore, the Bank has issued these directives pursuant to the authority vested in it

by Article 41 of the Monetary and Banking Proclamation No. 83/1994 and Article 8 of

the Licensing and Supervision of Insurance Business Proclamation No. 86/1994.

1. Definition

1.1 Emergency Travel Health Insurance: for the purpose of these directives shall

mean a policy which is not a general health insurance, and which covers medical

treatment for acute emergencies while the person is in Schengen States, return

transport of the patient and transfer of body in case of death while being in

Schengen States on short term travel.

1.2 Commission: for the purpose of these directives is a receipt of money by a local

insurer, which is licensed under the Licensing and Supervision of Insurance

Business Proclamation No. 86/1994, for services it renders as a commission agent

by selling Emergency Travel Health Insurance Policy of a Schengen State Insurer.

1.3 Schengen States: The Schengen States include Austria, Belgium, France,

Germany, Greece, Italy, Island, Denmark, Finland, Norway, Sweden, Luxemburg,

Nederland, Portugal, Spain and other states of Europe whose membership to the

Schengen States in the future shall be proven by the participating insurers;

1.4 Bank: Shall mean the National Bank of Ethiopia.

2. Special Permission


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2.1. An insurance company that is licensed in accordance with the Ethiopian

law is here by permitted to develop and issue its own Emergency Travel Health

Insurance Policy or to act as an agent of an insurer licensed by or registered in

a Schengen State to sell, the latter insurer’s Emergency Travel Health

Insurance Policy, on commission basis, to Ethiopian nationals who travel to

these States for short stay.

2.2. The Ethiopian insurance company entering into an agency agreement with the

said Schengen State insurer shall maintain appropriate documentation with

respect to the licensing or registration of the insurer in a Schengen State and the

terms and conditions of the agency agreement and make such documents

available for inspection to the Bank.

2.3. The Ethiopian Insurance Company involved in developing and issuing its own

Emergency Travel Health Insurance Policy shall submit to NBE its policy

forms, premium rates and Reinsurance Treaties (if any) for same.

3. Prohibition

No other person, organization, including all insurance intermediaries shall be

permitted to act as an agent of the registered insurance company of a Schengen

State to sell Emergency Travel Health Insurance Policy to Ethiopian nationals on

commission basis or otherwise.

4. Effective Date

These directives shall come into force as of the 6th

day of December 2004.


LICENSING OF INSURNACE BROKER



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These directives are issued by the National Bank of Ethiopia pursuant to the


No. 83/1994 and by Article 25 and 42(J) of the Licensing and Supervision of

Insurance Business Proclamation No. 86/1994.

2. DEFINITION.

2.1. Trader shall take the meaning given to it under Article 5(19) of the

Commercial Code of Ethiopia.

2.2. Business organization shall have the meaning specified to it under

Article 210 of the Commercial Code of Ethiopia.

2.3. Commercial Business Organizations shall have the meanings and

interpretations provided to them under Article 213(1&2) of the

Commercial Code of Ethiopia.

2.4. Commercial Broker shall have the meaning specified under Article 56(1&2) of

the Commercial Code of Ethiopia.

2.5. Insurance Broker shall take the meaning given to it under Article 2(11)

of Proclamation No. 86/1994.

2.6. “The Bank” Shall mean the National Bank of Ethiopia.

2.7. “Managerial Position” for the purpose of these directives shall mean the

position of an insurance company branch manager or above that involves

directly transacting insurance business in all or several classes.


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2.8. Organizational Units of an insurance company that directly transact insurance

business for the purpose of these directives shall mean the operational

units of an insurance company that mainly consist of an underwriting and

claims departments or divisions as the case may be.

3. FORM OF ESTABLISHMENT.

An Insurance Broker can be established in any form subject to compliance with any

provisions of the Commercial Code of Ethiopia, Licensing and supervision of

Insurance Business Proclamation No. 86/1994 and this Directive.

4. GENERAL REQUIREMENTS.

In order to be licensed as a broker, the applicant shall meet the following

conditions:

4.1 The applicant should be an Ethiopian national or a business organization

fully owned by Ethiopian nationals.

4.2 The chief executive officer of the firm shall: -

4.2.1 have at least a diploma in insurance or business related field

from an institute, a college or university acceptable to the Bank;

4.2.2. have a minimum of eight years work experience in the

organizational units of an insurance company that directly transact

insurance business in all or several classes, of which four years

should be in managerial position;


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4.3 An applicant for an insurance broker license shall not have any equity

interest in any insurance company or loss-adjusting firm.

5. CAPITAL.

An applicant for a broking firm under the form of Private Limited Company (PLC) or

Share Company (S.C) shall comply with the capital requirements of the Commercial

Code of Ethiopia.

6. PROFESSIONAL INDEMINTY.

6.1. Individual Brokers and Broking firms to be established under a form

of business organization whose liability is set to be unlimited by the

Commercial Code shall maintain a Professional Indemnity Insurance

Policy of birr100, 000 (one hundred thousand);

6.2. A Broking firm to be established under a form of business organization whose

liability is set to be limited by the Commercial Code shall maintain a

Professional Indemnity Insurance Policy of birr500, 000 (five hundred

thousand);

6.3. The benefits of the professional Indemnity Insurance Policy stated under sub-

articles 6.1 and 6.2 can only be claimed by policy holders or prospective

policy holders who sustained damage due to the professional negligence of

a broker subject to court award and after utilization of all other resources

of the broker.

7. FEES.

7.1. An applicant for a broker license shall pay initial license and subsequent annual

renewal fee of birr500. (birr five hundred).


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8. PENALTY.

8.1. An insurance broker that fails to comply with any of the Bank’s directives,

any of the provisions of the Licensing and Supervision of Insurance

Business Proclamation No. 86/1994 and/or the Commercial Code of

Ethiopia shall be subject to: -

8.1.1. a fine of Birr1,000 (birr one thousand) with written warning for

the first time and;

8.1.2. cancellation of the license upon failure to pay the fine stated

under sub-article 8.1.1 herein above within the specified time and

upon violation of any of the directive of the Bank and provisions of the

Proclamation and the Commercial Code for the second time.

9. INFORMATION REQUIRED FROM THE APPLICANT.

9.1. Evidence of paid up capital;

9.2. Professional indemnity Insurance Policy;

9.3. Names and occupation (including dates of previous employment) of

founders;

9.4. Four (4) photographs of the proposed manager.

9.5. Curriculum vitae of the proposed manager.

9.6. Duly completed application form as prescribed by the Bank and

submission of enclosures specified therein.

9.7. Memorandum and Articles of Association of the organization if the proposed

insurance broker is in the form of business organization.


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10. REPEAL

Directive No.SIB/21/2001 is hereby repealed and replaced by this directive.

11. EFFECTIVE DATE

This directive shall enter into force as of day of 2004.


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Directive No. SIB/30/2007 LICENSING AND SUPERVISION OF INSURANCE BUSINESS LICENSING OF INSURANCE AGENT ISSUING AUTHORITY These Directives are issued by the National Bank of Ethiopia pursuant to the authority vested in it by Article 41 of the Monetary and Banking Proclamation No. 83/1994 and Article 25 and Article 42(j) of the Licensing and Supervision of Insurance Business Proclamation No. 86/1994. DEFINITION “Insurance Agent” or “Agent” shall mean a person licensed by the Bank as an insurance agent who, acting for and on behalf of one or more insurers, engages in: (a) soliciting or procuring insurance business; (b) work preparatory to the conclusion of, or in concluding of insurance; and (c) activities relating to the continuance, renewal or revival of contracts of insurance or in assisting in the administration and performance of such contracts. “The Bank” shall mean the National Bank of Ethiopia. GENERAL REQUIREMENTS Where the applicant is a natural person, the person: shall be an Ethiopian national; shall at least have completed general secondary school level of education or equivalent; shall attend compulsory insurance sales agency training as stated under article 5 of these directives; or must have, at least, five years experience obtained through working in the underwriting and/or claims department of an insurance company; d) has not been convicted by court of law in any country, for an offense involving dishonesty. Where the applicant is a juridical person: It shall be formed in accordance with the requirements of the provisions of the Commercial Code of Ethiopia and that of Proclamation No. 86/1994; It shall be fully owned by Ethiopian nationals;


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It shall have its head office in Ethiopia; The chief executive officer of the agency should at least meet the education, training and/or experience and other requirements provided for under article 3 sub-article 1 (b) & (c) of these directives; The owners and the chief executive officer have not been convicted by court of law in any country, for an offense involving dishonesty. Where an application is made to carry on business: as a general insurance agent or as a long-term insurance agent, the applicant shall deposit Birr20,000 (Birr twenty thousand) with the Bank, or shall maintain a professional indemnity insurance cover of Birr20,000 (Birr twenty thousand); or as both general and long-term insurance agent, the applicant shall deposit with the Bank Birr40,000 (Birr forty thousand), or a professional indemnity insurance cover of Birr20,000 (Birr twenty thousand), in respect of each main line of insurance agency business he/she is applying for. 4. INFORMATION REQUIRED FROM AN INSURANCE AGENT A duly completed application form shall be accompanied by: The name and occupation (including date and address of previous employment) of the applicant. Two passport size recent photographs of the applicant or the chief executive officer, as the case may be. Curriculum Vitae of the applicant or the chief executive officer, as the case may be. 5. TRAINING An applicant intending to carry on business as an insurance sales agent must have attended a mandatory pre-licensing insurance sales agency training, offered by institutes acceptable to the Bank, in the main line of business that he/she is applying for license. A licensed insurance agent shall attend at least 30 hours of refreshment course every five years, focusing on insurance products covering, but not limited to, subjects such as motor, property, workmen’s compensation, life and permanent health assurance; sufficient to deliver technical information essential for maintaining a level of expertise that will continue to benefit insurance consumers. The insurer, on behalf of whom the insurance agent solicits business, shall ensure that its agents attended the refreshment course mentioned under sub-article 2 hereinabove. 6. FEES


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A person applying for a license to carry on business as an insurance agent shall pay an initial investigation fee of Birr300 (Birr three hundred). A person applying for a license to carry on business as an insurance agent shall pay an initial license and subsequent renewal fee of Birr250 (Birr two hundred fifty). An insurance agent licensed to carry on business either as general or long-term insurance agent and who subsequently applies for a license to carry on business both as a general and long-term insurance agent shall pay an Investigation and license fee of Birr300 (Birr three hundred). RENEWAL An insurance agency license shall be renewed annually. The insurance agent shall apply for the renewal of his/her license in person or, in the case of insurance agents residing outside Addis Ababa, an application duly signed by the agent shall be mailed or faxed to the principal insurer, or to the Bank, whichever is convenient to the applicant. The duly signed renewal application shall be accompanied by evidence of payment of renewal fee, valid indemnity policy, evidence of payment of applicable federal or regional tax and certificate of attendance of refreshment course, where applicable. The insurance agent shall submit his/her renewal application together with the documents mentioned under sub-article 3 hereinabove within one month of the expiry date of the license. Renewal applications submitted later than one month of the date of expiry of the license shall be subject to a penalty of Birr200 (Birr two hundred). Where an insurance agent fails to apply for renewal within 12 calendar months after the date of expiry of the license, his/her license shall be automatically cancelled, and such an agent shall only be eligible to apply for a new license after fully satisfying the conditions required of a new agent. 8. MAINTAINING A VALID PROFESSIONAL INDEMNITY POLICY The Bank shall automatically cancel the license of any insurance agent who fails to maintain a valid professional indemnity insurance policy at all times. For the purpose of ensuring compliance with the requirement of sub-article 1 hereinabove an insurance agent shall promptly file with the Bank a copy of valid professional indemnity insurance policy upon renewal. 9. REPEAL Directive No. SIB/18/1998 is hereby repealed and replaced by these Directives.


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10. EFFECTIVE DATE These Directives shall enter into force as of 1st day of January 2008. Teklewold Atnafu Governor NATIONAL BANK OF ETHIOPIA LICENSING AND SUPERVISION OF INSURANCE BUSINESS Directive No. SIB/30/2007 LICENSING OF INSURANCE AGENT ISSUING AUTHORITY These Directives are issued by the National Bank of Ethiopia pursuant to the authority vested in it by Article 41 of the Monetary and Banking Proclamation No. 83/1994 and Article 25 and Article 42(j) of the Licensing and Supervision of Insurance Business Proclamation No. 86/1994. DEFINITION “Insurance Agent” or “Agent” shall mean a person licensed by the Bank as an insurance agent who, acting for and on behalf of one or more insurers, engages in: (a) soliciting or procuring insurance business; (b) work preparatory to the conclusion of, or in concluding of insurance; and (c) activities relating to the continuance, renewal or revival of contracts of insurance or in assisting in the administration and performance of such contracts. “The Bank” shall mean the National Bank of Ethiopia. GENERAL REQUIREMENTS Where the applicant is a natural person, the person: shall be an Ethiopian national;


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shall at least have completed general secondary school level of education or equivalent; shall attend compulsory insurance sales agency training as stated under article 5 of these directives; or must have, at least, five years experience obtained through working in the underwriting and/or claims department of an insurance company; d) has not been convicted by court of law in any country, for an offense involving dishonesty. Where the applicant is a juridical person: It shall be formed in accordance with the requirements of the provisions of the Commercial Code of Ethiopia and that of Proclamation No. 86/1994; It shall be fully owned by Ethiopian nationals; It shall have its head office in Ethiopia; The chief executive officer of the agency should at least meet the education, training and/or experience and other requirements provided for under article 3 sub-article 1 (b) & (c) of these directives; The owners and the chief executive officer have not been convicted by court of law in any country, for an offense involving dishonesty. Where an application is made to carry on business: as a general insurance agent or as a long-term insurance agent, the applicant shall deposit Birr20,000 (Birr twenty thousand) with the Bank, or shall maintain a professional indemnity insurance cover of Birr20,000 (Birr twenty thousand); or as both general and long-term insurance agent, the applicant shall deposit with the Bank Birr40,000 (Birr forty thousand), or a professional indemnity insurance cover of Birr20,000 (Birr twenty thousand), in respect of each main line of insurance agency business he/she is applying for. 4. INFORMATION REQUIRED FROM AN INSURANCE AGENT A duly completed application form shall be accompanied by: The name and occupation (including date and address of previous employment) of the applicant. Two passport size recent photographs of the applicant or the chief executive officer, as the case may be. Curriculum Vitae of the applicant or the chief executive officer, as the case may be.


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TRAINING An applicant intending to carry on business as an insurance sales agent must have attended a mandatory pre-licensing insurance sales agency training, offered by institutes acceptable to the Bank, in the main line of business that he/she is applying for license. A licensed insurance agent shall attend at least 30 hours of refreshment course every five years, focusing on insurance products covering, but not limited to, subjects such as motor, property, workmen’s compensation, life and permanent health assurance; sufficient to deliver technical information essential for maintaining a level of expertise that will continue to benefit insurance consumers. The insurer, on behalf of whom the insurance agent solicits business, shall ensure that its agents attended the refreshment course mentioned under sub-article 2 hereinabove. FEES A person applying for a license to carry on business as an insurance agent shall pay an initial investigation fee of Birr300 (Birr three hundred). A person applying for a license to carry on business as an insurance agent shall pay an initial license and subsequent renewal fee of Birr250 (Birr two hundred fifty). An insurance agent licensed to carry on business either as general or long-term insurance agent and who subsequently applies for a license to carry on business both as a general and long-term insurance agent shall pay an Investigation and license fee of Birr300 (Birr three hundred). RENEWAL An insurance agency license shall be renewed annually. The insurance agent shall apply for the renewal of his/her license in person or, in the case of insurance agents residing outside Addis Ababa, an application duly signed by the agent shall be mailed or faxed to the principal insurer, or to the Bank, whichever is convenient to the applicant. The duly signed renewal application shall be accompanied by evidence of payment of renewal fee, valid indemnity policy, evidence of payment of applicable federal or regional tax and certificate of attendance of refreshment course, where applicable. The insurance agent shall submit his/her renewal application together with the documents mentioned under sub-article 3 hereinabove within one month of the expiry date of the license. Renewal applications submitted later than one month of the date of expiry of the license shall be subject to a penalty of Birr200 (Birr two hundred). Where an insurance agent fails to apply for renewal within 12 calendar months after the date of expiry of the license, his/her license shall be automatically cancelled, and


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such an agent shall only be eligible to apply for a new license after fully satisfying the conditions required of a new agent. 8. MAINTAINING A VALID PROFESSIONAL INDEMNITY POLICY The Bank shall automatically cancel the license of any insurance agent who fails to maintain a valid professional indemnity insurance policy at all times. For the purpose of ensuring compliance with the requirement of sub-article 1 hereinabove an insurance agent shall promptly file with the Bank a copy of valid professional indemnity insurance policy upon renewal. 9. REPEAL Directive No. SIB/18/1998 is hereby repealed and replaced by these Directives. 10. EFFECTIVE DATE These Directives shall enter into force as of 1st day of January 2008.


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LICENSING OF INSURANCE BROKER

DIRECTIVE NO. SIB/31/2010 1. ISSUING AUTHORITY

This directive is issued by the National Bank of Ethiopia pursuant to the authority vested in it by Article 27 of the National Bank of Ethiopia Establishment (as Amended) Proclamation No, 591/2008 and Article 42(j) of the Licensing and Supervision of Insurance Business Proclamation No. 86/1994.

2. DEFINITION

1) “Insurance Broker” or “Broker” shall mean a person licensed as an insurance broker by the Bank who, acting for and on behalf of policyholders or proposers for insurance: a) places insurance business with insurers; b) carries out work preparatory to the conclusion of contracts of insurance and reinsurance; and c) where appropriate, assists in the administration and performance of such contracts.

2) “The Bank” shall mean the National Bank of Ethiopia.

3) “Chief Executive Officer” shall mean a person, by whatever title that

person may be referred to, who is chiefly responsible for the day-to-day management of the affairs of a broking firm.

3. FORM OF ESTABLISHMENT

An insurance broker can be established in any form so far as it complies with the provisions of the Commercial Code of Ethiopia, the Licensing and Supervision of Insurance Business Proclamation No. 86/1994, and these Directives.

4. GENERAL REQUIREMENTS

In order to be licensed as an insurance broker, the following conditions shall be met: 1) An applicant shall be an Ethiopian national or a business organization

fully owned by Ethiopian nationals.

2) An applicant or the owners, where the applicant is a firm, have not been


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convicted by court of law, in any country, for an offence involving dishonesty.

3) An applicant shall be a person with honesty, integrity, diligence and reputation to the satisfaction of the Bank.

4) Chief executive officer of an insurance broker, in any form of

establishment, shall:

a) hold, at least a diploma in insurance or any one of business related fields from an institute, college or university acceptable to the Bank; and

b) a minimum of eight years reputable managerial experience

acquired through working at the head office of an insurance company with responsibility to oversee operational areas of underwriting and claims.

5) The requirements of sub article 4(4) hereinabove may not be applicable

on chief executive officer of any insurance broker licensed before the effective date of this directive.

6) Notwithstanding Article 4(5) of this Directive, the provisions of Article

4(4) shall apply on all persons who:

a) apply for insurance broker license; b) applied for insurance broker license but has not yet got approval

on or before the effective date of this directive.

5. INFORMATION REQUIRED FROM THE APPLICANT 1) Professional Indemnity Insurance Policy.

2) Names and occupation (including dates of previous employment) of

founders, where applicable.

3) Four (4) photographs of the proposed Chief Executive Officer.

4) Curriculum Vitae and supporting documents of the proposed Chief Executive Officer.

5) Duly completed application form as prescribed by the Bank and

enclosures specified therein.

6) Memorandum and articles of association of the organization if the proposed insurance broker is in the form of business organization.

7) Full address of principal place of business and branch offices.

8) Any other information as may be required by the Bank from time to

time.


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6. PRINCIPAL PLACE OF BUSINESS

1) An insurance broker shall have a principal place of business where the

normal day-to-day business shall be conducted, and shall furnish full information concerning its address, telephone number and other similar details to the Bank.

2) The broker shall provide the Bank with prior notice of the opening of

any branch office together with its full address. In the event of closing any branch office, the broker shall give the reason for the closure and the manner of dealing with any pending business of the branch office.

7. DUTIES AND RESPONSIBILITIES

1) An insurance broker shall have the following duties and responsibilities:

a) represent the client in the course of negotiating insurance cover and serve the client with reasonable professional skill in the course of dispensing advice on the insurance needs of the client.

b) discharge his duties and responsibilities as a diligent businessman

with good faith and integrity. c) do everything possible to satisfy the insurance requirements of its

clients before all other considerations. d) subject to an agreement with the insurer, may collect premiums,

issue cover notes, and settle claims up to a pre-agreed limit. e) ensure all work carried out in connection with the insurance

broking business is under the control and day-to-day supervision of the Chief Executive Officer of the firm;

f) clearly explain the differences and relative costs of the principal

types of insurance to the client and provide advice on the types of insurance cover that best suit the client's needs.

g) offer a particular risk to at least three insurers and carry out a

thorough analysis of each insurer's proposal with particular emphasis on price, scope of cover and the reputation of the insurer.

h) notwithstanding what is stated under sub-article (g) hereinabove, a

broker may place a particular risk with an insurance company of the insured’s choice, where the prospective insured has already decided upon the insurer with whom the particular risk is going to be placed, by securing a written statement from the prospective insured to this effect.


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i) place the clients’ business with an insurance company/companies after providing the client with detailed information concerning the insurance company/companies, the type(s) of cover, the cost, inception and expiry date of policy and such other information relating to the risk covered after securing the full consent of the client.

j) make the client aware of the legal consequences of failure of

disclosure of material facts pertaining to the risk being proposed and ensure that the client exercised due care in the completion of proposal form, claim form, or any other material document. Where a client provides full information to a broker and that broker fails to disclose all material facts to an insurer, thereby entitling the insurer to repudiate the contract, the client shall have a right to seek redress from the broker for any damages suffered as a result of the broker's actions or omissions.

k) conscientiously discharges his fiduciary responsibilities towards

the client concerning any premium and/or any claim payment, received from or due to, the client.

2) An insurance broker shall maintain, at its principal place of business, a

record of the name of every client, policy number, premium paid, subject matter of insurance, the date of inception and date of renewal of the policy, sum insured, and, in respect of claims settled through or with the involvement of the broker, the amount and date of claim made, the date on which the claim was paid, the amount paid, and, in the case of a claim being repudiated, the date and reason for repudiation, and in the event of partial settlement, the reason thereof.

8. PROHIBITION

An individual insurance broker, or in the case of a broking firm, a chief executive officer or a partner or a shareholder, and/or his/her spouse and/or any other person who is related to him/her and/or his spouse consanguinally in the first-degree relationship shall not have any equity interest in any insurance company or loss-adjusting firm or a firm of actuary.

9. PROFESSIONAL INDEMNITY 1) An insurance broker shall maintain a valid professional indemnity

insurance cover at all times. 2) The Professional Indemnity Insurance Policy shall, at inception and at

each renewal date, provide a minimum limit of indemnity for a sum equal to three times the annual general commission earned by the broker in the last accounting period ending prior to inception or renewal of the policy, or a sum of Birr1, 000,000 (Birr One million) which ever sum is greater.

3) The policy shall provide indemnity against losses arising from claims


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made against the broker: a) for breach of duty in connection with the business by reason of

any negligent act, error or omission. b) in respect of libel or slander (defamation), committed in the

conduct of the business by the broker, any employee or former employee of the broker, and where the business is or was carried on in partnership, any partner or former partner of the broker.

c) by reason of any dishonest or fraudulent act or omission

committed or made in the conduct of the business by any employee or former employee of the insurance broker.

d) in respect of any loss of money or other property whatsoever

for which the insurance broker is legally liable in consequence of any dishonest or fraudulent act or omission of any employee or former employee of the insurance broker.

e) in respect of legal liability incurred by reason of loss of

documents and costs and expenses incurred in replacing or restoring such documents.

4) Maintaining a Valid Insurance Policy

a) The Bank shall automatically cancel the license of any insurance

broker who fails to maintain a valid professional indemnity insurance policy at all times.

b) For the purpose of ensuring compliance with the requirement of

sub-article (a) hereinabove, an insurance broker shall promptly file with the Bank a copy of valid professional indemnity insurance policy at inception or subsequent renewal.

10. FEES 1) A person applying for a license to carry on business as an insurance

broker shall pay an investigation fee of Birr550 (Birr five hundred fifty).

2) A person applying for a license to carry on business as an insurance broker shall pay initial license fee and subsequent annual renewal fee of Birr1, 000 (Birr one thousand).

11. RENEWAL

1) The license of an insurance broker shall be renewed annually. 2) The application for renewal shall be accompanied by evidence of

payment of renewal fee and a valid indemnity policy, and shall be submitted within one month of the expiry date of the license.


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3) Renewal applications submitted one month after the expiry date of the license shall be subject to a penalty of Birr500 (Birr five hundred).

4) Where an insurance broker fails to apply for renewal within 12 calendar

months after the date of expiry of the license, his/her license shall be automatically cancelled. Such person shall only be eligible to be licensed as an insurance broker provided he/she fully meets the requirements of these directives.

12. PENALTIES

An insurance broker that fails to comply with any of the Bank's directives and/or any of the provisions of the Licensing and Supervision of Insurance Business Proclamation No. 86/1994 shall be subject to: - 1) A fine of Birr5, 000 (Birr five thousand) with a written warning for the

first time;

2) Cancellation of the license upon failure to pay the fine stated under sub-article 1 hereinabove within the specified time; and/or upon violation of any of the directives of the Bank or any provisions of Proclamation No. 86/1994 for the second time.

13. REPEAL

Directive No. SIB/29/2007 is hereby repealed and replaced by these Directives.

14. EFFECTIVE DATE These Directives shall enter into force as of 15st day of July 2010. Teklewold Atnafu Governor NATIONAL BANK OF ETHIOPIA


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licensing and supervision of insurance business

Documents