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

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1 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 Mobile: Blog:

2 CONSOLIDATED NATIONAL BANK of ETHIOPIA DIRECTIVES LICENSING AND SUPERVISION OF INSURANCE BUSINESS Table of Contents DIRECTIVE SIB/1/1994 LICENSING AND SUPERVISION OF INSURANCE BUSINESS SIB/6/1994 INVESTIGATION FEE TO BE PAID BY INSURANCEAUXILIARIES AND ACTUARIES SIB/8/1995 AMENDMENT OF OPENINGOF BRANCHES SIB/009/95 INSURANCE BROKERS CODE OF CONDUCT SIB/11/1996 LICENSING OF INSURANCE ACTUARY SIB/12/1996 INSURANCE BUSINESS LICENSING OF INSURANCE LOSSASSESSORS AND LOSS ADJUSTORS SIB/17/98 Manner of Reporting Financial Information SIB/18/98 Amendment of Licensing of Insurance Agent SIB/19/98 Sanctions against Failure to Maintain Renewed Business License and Professional Indemnity Insurance Policy SIB/21/2001 Amendment of Licensing of Insurance Broker SIB/22/2002 Licensing of Insurance Surveyors PAGE

3 SIB/24/2004 Amendment of PROHIBITION OF ISSUANCE OF CERTIAN TYPES OF BONDS BYINSURANCE COMPANIES SIB/25/2004 INVESTMENT OF INSURANCE FUNDS SIB/26/2004 MANNER OF COMPUTING MARGIN OF SOLVENCY FOR INSURANCECOMPANIES SIB/27/2004 Amendment of FINE FOR NON-COMPLIANCE WITH THE DIRECTIVES OF THE NATIOAL BANK OF ETHIOPIA SIB/28/2004 EMERGENCY TRAVEL HEALTH INSURANCE SIB/28/2004 LICENSING OF INSURNACE BROKER SIB/30/2007 LICENSING OF INSURANCE AGENT SIB/31/2010 LICENSING OF INSURANCE BROKERS SIB/1/1994 LICENSING AND SUPERVISION OF INSURANCE BUSINESS

4 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 P.O.BOX 5550 ADDIS ABABA CODES USED PETERSON 3 rd & 4 th ED. BENTLEY S 2 nd PHRASE Supervision of Insurance Business Title Directive No. Licensing and Supervision of Insurance Business SIB/1/94 Investigation Fee to be paid by Insurance SIB/6/94 Auxiliaries and Actuaries 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 SIB/12/96 Adjustors Manner of Reporting Financial Information SIB/17/98 Licensing of Insurance Agent SIB/18/98 Sanction against Failure to Maintain Renewed SIB/19/98 Page 1 of 69 1

5 Business License and Professional Indemnity Insurance Policy Amendment of Licensing of Insurance Broker Licensing of Insurance Surveyors Amendment of Prohibition of Issuances of Certain Types of Bands by Insurance Companies Investment of Insurance Funds Manner of Computing Margin of Solvency for Insurance Companies Amendment of Fine for Non-Compliance with the Directives of the National Bank Emergency Travel Health Insurance SIB/21/2001 SIB/22/2002 SIB/24/2004 SIB/25/2004 SIB/26/2004 SIB/27/2004 SIB/28/2004 LICENSING AND SUPERVISION OF INSURANCE BUSINESS DIRECTIVE NO. SIB/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/ Definitions Page 2 of 69 2

6 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/ 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. ¾ =ƒäåá wn?^ v NATIONAL BANK OF ETHIOPIA 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. Page 3 of 69 3

7 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 Duly completed application form as prescribed by the Bank and submit enclosures specified therein 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 4.3 Age A minimum of ten years of reputable managerial experience in insurance or related business. A minimum of thirty five years. 4.4 Marital Status Preferably married or responsible to a family. ¾ =ƒäåá wn?^ v NATIONAL BANK OF ETHIOPIA 5. Criteria for Selection of Members of Board of Directors 5.1 Education Page 4 of 69 4

8 6. Fees A minimum completion of high school education with ability to read and grasp contents of reports, especially financial statements. 5.2 Experience 5.3 Age Member of Board of directors shall have adequate managerial experience in business, and/or similar organizations. A minimum of 30 years of age 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 Name of applicant and Designation Page 5 of 69 5

9 . 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: Photo of Representative Location of Applicant P.O.Box Tel. Telex Fax 4.2 Branch Address: (if any) Location Tel. P.O.Box 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 Page 6 of 69 6

10 5.1.1 Shares Held * (Where the founders are more than ten, annex a list in same form) Page 7 of 69 7

11 6. Names and Addresses of Members of Board of Directors 6.1 Name Occupation Residence Nationality Address Number of Shares Held (Attach curriculum vitae of each director) Page 8 of 69 8

12 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 Number of shares held by founders Number of shares held by subscribers 9.2 Par value of each share in Birr Page 9 of 69 9

13 10. Provide the following information with respect to: 10.1 Cost of premises' equipment and others where purchased or leased by the applicant. Building Land Vault Item Manner of Acquisition Cost 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. Page 10 of 69 10

14 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 Page 11 of 69 11

15 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 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. Page 12 of 69 12

16 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 Page 13 of 69 13

17 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. Page 14 of 69 14

18 LICENSING AND SUPERVISION OF INSURANCE BUSINESS INVESTIGATION FEE TO BE PAID BY INSURANCE AUXILIARIES AND ACTUARIES DIRECTIVE NO. SIB/6/ 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/ 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 3 rd day of November LICENSING AND SUPERVISION OF INSURANCE BUSINESS AMENDMENT OF OPENING OF BRANCHES DIRECTIVE NO. SIB/8/ ISSUING AUTHORITY Page 15 of 69 15

19 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/ 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 NATIONAL BANK OF ETHIOPIA PAGE 2 5. Fee An insurer licensed to open a branch shall pay Birr (Five Hundred Birr) for each licensed branch." These Directives shall enter into force as of 22 nd day of May Page 16 of 69 16

20 INSURANCE BROKERS CODE OF CONDUCT DIRECTIVE NO. SIB/009/95 1. Short Title This Directive may be cited as The Insurance Brokers Code of conduct Directive No. SIB/011/ 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 by Article 42 (j) of the Licensing and Supervision of Insurance Business Proclamation No. 86/ Definition (a) (b) (c) 'Insurance Broker' shall mean a person duly licensed as Insurance Broker in accordance with directive No. SIB/3/1994; 'Insurer' means a person or body of persons carrying on Insurance business; '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 Page 17 of 69 17

21 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 Page 18 of 69 18

22 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 19

23 ¾ =ƒäåá wn?^ v NATIONAL BANK OF ETHIOPIA (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 Telex No Addis Ababa These Directive shall come into force as of 17th day of November November 16, 1995 LICENSING AND SUPERVISION OF INSURANCE BUSINESS LICENSING OF INSURANCE ACTUARY Page 20 of 69 20

24 DIRECTIVE No. SIB/11/ 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 by Article 25 of Licensing and Supervision of Insurance Business Proclamation No. 86/ 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; Page 21 of 69 21

25 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 8 th day of April April 5, 1996 LICENSING AND SUPERVISION OF INSURANCE BUSINESS LICENSING OF INSURANCE LOSS ASSESSORS AND LOSS ADJUSTORS DIRECTIVE No. SIB/12/ 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 of the Licensing and Supervision of Insurance Business Proclamation No. 86/ 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. Page 22 of 69 22

26 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 6. Fees 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. 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). 7. Other Requirements 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. Page 23 of 69 23

27 These Directives shall enter into force as of 8 th day of April April 5, 1996 LICENSING AND SUPERVISION OF INSURANCE BUSINESS Directive No. SIB/17/98 Manner of Reporting Financial Information 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 by Article 42(j) of the Licensing and supervision of Insurance Business Proclamation No. 86/ 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 24

28 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 =ƒäåá 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; Page 25 of 69 25

29 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 =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 For the purpose of reporting financial information: Page 26 of 69 26

30 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 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 For the purpose of reporting financial information: 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 27

31 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 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 LICENSING AND SUPERVISION OF INSURANCE BUSINESS Directive No. SIB/18/98 Amendment of Licensing of Insurance Agent 1. Issuing Authority Page 28 of 69 28

32 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 the Licensing and Supervision of Insurance Business Proclamation No. 86/ 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 29

33 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; nationals; b) It has its head office in Ethiopia and fully owned by Ethiopian 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 30

34 5. Other Requirements 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 1 st day of August LICENSING AND SUPERVISION OF INSURANCE BUSINESS Directive No. SIB/19/98 Sanctions against Failure to Maintain Renewed Business License and Professional Indemnity Insurance Policy 1. Issuing Authority 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 Page 31 of 69 31

35 Banking Proclamation No. 83/1994 and Article 42(j) of the Licensing and Supervision of Insurance Business Proclamation No. 86/ 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 Page 32 of 69 32

36 These Directives shall be effective as of the 1 st day of August LICENSING AND SUPERVISION OF INSURANCE BUSINESS Directive No. SIB/21/2001 Amendment of Licensing of Insurance Broker 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 by Article 25 and 42(j) of the Licensing and Supervision of Insurance Business Proclamation No. 86/ DEFINITION 2.1. "The Bank" shall mean the National Bank of Ethiopia "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. Page 33 of 69 33

37 2.3. "Broker" will take the meaning given to it under proclamation No.86/94 article 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: hold a diploma or above in insurance or business related fields from an institute, a college or university acceptable to the Bank; 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. LICENSING AND SUPERVISION OF INSURANCE BUSINESS Page 34 of 69 34

38 Licensing of Insurance Surveyors Directive No. SIB/22/ ISSUING AUTHORITY 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/ DEFINITION "Insurance Surveyor" or "Surveyor" will take the meaning given to it under Article 14 of Proclamation No. 86/ 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 35

39 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 1 st day of June LICENSING AND SUPERVISION OF INSURANCE BUSINESS Directive No. SIB/24/2004 Amendment of PROHIBITION OF ISSUANCE OF CERTIAN TYPES OF BONDS BY INSURANCE COMPANIES Page 36 of 69 36

40 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. ¾ =ƒäåá wn?^ v NATIONAL BANK OF ETHIOPIA 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 37

41 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. ¾ =ƒäåá wn?^ v NATIONAL BANK OF ETHIOPIA 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 38

42 (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: ¾ =ƒäåá wn?^ v NATIONAL BANK OF ETHIOPIA 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 39

43 These directives shall come into force as of the 1st day of March 2004 LICENSING AND SUPERVISION OF INSURANCE BUSINESS INVESTMENT OF INSURANCE FUNDS DIRECTIVE NO. SIB/25/2004 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 authority vested in it by Article 41 of the Monetary and Banking Proclamation No. 83/1994 and Article 14 (1) of the Licensing and supervision of Insurance Business Proclamation No. 86/1994. ¾ =ƒäåá wn?^ v NATIONAL BANK OF ETHIOPIA Page 40 of 69 40