Insuring the future

Gamal Essam El-Din , Monday 29 Apr 2024

Following three days of debates, MPs give their final approval to a unified insurance law.

A new law will organize the insurance sector
A new law will organize the insurance sector

 

New standards for regulating the insurance market in Egypt have been approved by the House of Representatives.

“Four decades of different insurance laws have underlined just how desperately the sector needs unified regulatory rules,” said Mohamed Suleiman  Suleiman, head of the Economic Affairs Committee. The creation of new insurance tools and technological developments has served only to reinforce this urgent need.

In addition to regulating insurance companies and special funds, the new law covers mandatory insurance required by the state before engaging in activities — such as driving a car — which might cause harm, and the activities of doctors, lawyers and accountants.

According to Suleiman, the law streamlines insurance rules in line with international standards and will speed up digitisation and the use of financial technology, all while balancing the interests of policy holders and insurance firms.

Article 2 establishes the parameters of the insurance net which covers “individuals, property, medical businesses, and micro-enterprises”. The legislation makes insurance mandatory in 21 cases, covering everything from non-banking financial services and student health to marriage.

“The law widens obligatory insurance and promotes inclusiveness by reaching out to people on limited incomes — new insurance services will be offered to cover workers and farmers — who are currently not covered by any kind of insurance, including health,” said Suleiman.

A report released by the Economic Affairs Committee revealed the extent of Egypt’s insurance industry. It includes 41 companies that collect LE47.5 billion in insurance instalments annually and pay out LE33.5 billion in compensation, and 692 insurance funds which collect LE10.5 billion in annual subscriptions and pay out LE9.9 billion in compensation. Insurance company net investments stood at LE131.466 billion in July 2021, and insurance funds’ investments at LE85.61 billion. The figures, said the report, reveal a thriving market in need of effective supervision.

House Speaker Hanafi Gebali said the law is in line with Article 28 of the constitution which requires the state to create an investment-friendly climate, with special attention paid to small, medium, and micro enterprises.

“By making insurance compulsory for small-scale enterprises the law lays the groundwork for their future growth,” says Financial Regulatory Authority (FRA) head Mohamed Farid.

“It complies with Article 221 of the constitution which states that the FRA is responsible for monitoring and supervising non-banking financial activities, including capital markets and insurance.”

“The new legislation also introduces insurance against natural disasters such as earthquakes, floods, heavy rains, windstorms and epidemics like coronavirus.”

Article 113 gives the FRA statutory rights to license foreign insurance and reinsurance companies operating in Egypt against a registration fee of $5,000 and a $1,000 annual renewal fee. Licensing decisions will be issued within a month of application and in the case of rejection, an explanation will be provided, says Farid.

Article 100 allows the FRA to license the merger of private insurance funds, while Article 153 increases insurance companies’ minimum paid-up capital from LE150 million to LE250 million and sets a threshold of LE1 billion in paid up capital for reinsurance companies to be licensed. Reinsurance companies will also be allowed to open accounts abroad to cover foreign activities.

The increases are necessary to ensure insurers can meet their financial obligations, particularly during times of high inflation, says Farid.

Except for cases that come under the jurisdiction of the State Council, economic courts will arbitrate any disputes arising from the implementation of the law.


* A version of this article appears in print in the 25 April, 2024 edition of Al-Ahram Weekly

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