Friday, June 14, 2024

Insurers ask for separate body to regulate sector


The Association of Ethiopian Insurers has asked the National Bank of Ethiopia (NBE), for permission to stop supervising the insurance industry and that a new body be formed to follow up with the insurance sector, according to sources.
The issue was also raised during the second East African Financial Summit held at ECA a week ago. During that discussion insurance experts claimed the sector was not being given adequate attention because NBE, which regulates the financial industry, focuses on banks.
An expert, who once led a private insurance company, told Capital that the central bank does not fully understand the insurance industry. “This has affected the growth of the insurance sector, which contributes an insignificant percentage to Ethiopia’s GDP,” he said.
“Regulating the insurance industry without the central bank is required for insurance businesses to grow,” an expert explained.
Experts said that during the Imperial Era insurance was regulated by the Ministry of Trade.
The proposed regulatory body would be a commission or other supervisory entity that can more fully understand and respond to the demand of the insurance industry.
According to experts, in other parts of the world the insurance industry is not regulated by central banks, instead separate entities are responsible for managing the sector.
The insurance penetration in Ethiopia is very small and its share of the GDP is about 0.5 percent. Meseret Bezabih, CEO of United Insurance Company and President of the Insurers Association, told Capital that the association submitted its proposal to the central bank about a month ago to discuss the fate of the insurance industry.
“We just put the agenda up for discussion and we are now waiting for a meeting,” she added.
Since the market reopened after the downfall of the Derg regime the private insurance sector has been regulated under proclamation 86/1994 and NBE is responsible for overseeing it.
Currently there are one state owned and 16 private insurance companies in the country. They have 492 branches and 53.5 percent are located in the capital.
The total capital of the 17 insurance companies is over 3.6 billion birr, private insurance companies have 76 percent of this amount. In the 2016/17 financial year the insurance industry’s written premiums stood at 7.4 billion birr and general insurance grabbed almost 95 percent of that total.
NBE is responsible for supervising the financial sector as a whole including insurance, banks and micro finances. “If the new proposal is accepted it would be overlooked by a separate body responsible to the Ministry of Finance and Economic Cooperation,” an expert said.

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