By Favour Nnabugwu
The National Bank of Ethiopia (NBE) has raised the minimum paid-up capital of insurance firms more than five times.
The revised capital requirement took effect on 15 September 2022 after nine years. The first such change since 2013.
The new minimum capital requirements are:for a general insurance licence, ETB400m ($7.52m), 567% up from ETB60m previously
for a long-term insurance licence, ETB100m, which is also 567% more than the previous minimum of ETB15m.
Furthermore, a company needs to deposit ETB500m in a closed account to obtain a licence, compared to ETB75m previously, according to The Reporter.
Of the 18 existing insurance companies in the country, only seven at present have a paidup capital of more than ETB500m each, according to NBE’s report.
Existing insurance companies whose paid-up capital is below the new threshold are given a five-year grace period to meet the new minimum threshold by 30 June 2027. However, these insurers are required to submit a capital increase plan to the NBE by 16 October 2022.
However, the old capital rules remain applicable to new insurance companies that are in the process of share subscriptions until 15 September 2023. This means that prospective investors in new insurance companies can obtain a licence under the existing directive for the next 12 months.