The revised ‘Minimum Paid-up Capital for Insurance Company’ has raised the new capital required to obtain a general insurance license from ETB60 million to a whopping ETB400 million.
Effective as of September 15, 2022, this legislation replaced the existing legal level introduced in 2013.
Existing insurance companies with less than the new minimum threshold is given a five-year window to meet the new minimum threshold by June 30, 2027.
According to the NBE report, only seven of the country’s 18 existing insurance companies have capital of more than 500 million birr. Regardless, these insurers must submit a plan of action to the NBE by October 16, 2022.
Besides general insurance, the minimum capital for long-term insurance licenses was also raised from ETB15 million to ETB100 million. However, a company needs to deposit ETB500 million in a closed account to obtain a license for both, which was ETB75 million under the old directive.
The old directive, however, remains in effect for new insurance firms underway until September 15, 2023. This means that new insurance firm organizers can obtain a license under the current directive within the next year.
According to The Reporter, a discussion is underway to adjust the license fee required to acquire a new license and renew existing ones, with an expected modification of 2000%.
The same source indicates that insurance companies in the process of share subscription that successfully accumulate a minimum paid-up capital of 60 million birr for general insurance, ETB15 million for long-term insurance, or ETB75 million for both and submit a final application to NBE within one year of the new directive’s effective date will be granted the license.
Source: The Reporter Newspaper
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