• Dr. Omran: For the first time in Egypt, health care companies are subjected to FRA’s supervision to regulate incorporation rules and conditions for practicing their activity while allowing a period of reconciliation
• Introducing compulsory automobile liability insurance through a specialized insurance pool for this purpose
• Developing mechanisms for resolving clients’ complaints and establishing FRA’s Arbitration and Dispute Settlement Center
• The new law will increase the benefits and advantages for nearly 5 million families benefiting from the optional pension scheme managed by private insurance funds
Dr. Mohammed Omran – FRA’s Chairman revealed that the Insurance Advisory Committee has completed the first draft of the comprehensive and unified insurance law to regulate the insurance activity in Egypt. The draft will be presented forward to the community dialogue at the beginning of 2019 to discuss it with all the units operating in the Egyptian insurance industry and legal persons including groups of professions associated with the insurance industry. Accordingly, their suggestions will be received and sent to the official authorities concerned with issuing the law in its final form in the early days of the new year.
Dr. Omran emphasized that the unified insurance law will include in its eight chapters (224 articles) the rules set for regulating the activities of the insurance and reinsurance companies in life insurance and fund formation activities. This is in addition to property insurance and liability insurance, distinction of takaful companies (life-public) , compulsory insurance of civil liability arising from motor accidents – known as Compulsory Automobile Liability Insurance -. Also, the activities of private insurance funds will be combined under the umbrella of a comprehensive and unified law, in accordance with the best practices and international legislations. Thus, Egypt will have a unified and comprehensive insurance law, whatever the form of the legal person in Egypt and even if its statute regulations are varied.
FRA’s Chairman stated that the amendments which were studied and prepared in a comprehensive and unified law for the insurance industry seeks to achieve eight main strategic objectives. One of the main objectives are creating a safety net for the Egyptian society by imposing compulsory insurance for professional liability, expanding the base of financial inclusion to improve the economic conditions of the poor and marginalized groups. That is besides increasing the national saving rates which is reflected in increasing investments, pushing the national economy and changing the philosophy of regulator’s role in Egypt so as to ensure the rights of policyholders and beneficiaries rather than simply protecting them.
Dr. Omran added that the objectives of the proposed law focus on achieving financial stability and enhancing clients’ trust upon dealing with insurance companies and private insurance funds. That is besides accelerating the digital transformation of insurance companies and private insurance after filling the current legislative gaps, namely that some activities related to the insurance industry are not subjected to FRA’s supervision. In addition to promoting risk-based approach in accordance with international standards.
Dr. Oman stressed that upon applying a new unified law several things needed to be introduced, things that cannot be achieved by the law of supervision and control of insurance No. 10 of 1981 and its amendments which was issued for more than 37 years. He added that there was a need to present the proposed version for community dialogue. He emphasized that the new law includes for the first time the regulation of Takaful insurance activity, compulsory automobile liability insurance through a specialized insurance pool for this purpose. In addition, the new amendments put health care companies under FRA’s supervision and the Law regulates incorporation rules and conditions of practicing its activities and setting a period of recondition for these companies. That is besides allowing the establishment of micro insurance companies and approving the issuance of private and public micro-insurance products all together in accordance with the rules set by FRA in this regard.
FRA’s Chairman added that insurance draft law gives flexibility to the regulator upon determining the capital sufficient and necessary to meet companies’ obligations based on the risks. In addition, the said law raises the capital adequacy of insurance and reinsurance companies by increasing the minimum capital upon incorporation. Also, the said law reviewed the investment policies and rules of distribution of investment portfolio of insurance companies and private insurance funds, which will increase the return on investment within the framework of acceptable risks. Besides, it achieves principles of matching assets and liabilities and identifies the mechanisms and rules of merging and acquisitions, as well as integration rules for private insurance funds. Also, the draft law develops mechanisms of resolving clients’ complaints and settling disputes. It defines the role of FRA’s Arbitration and Dispute Settlement Center. On the other hand, the Law grants powers to FRA’s Board of Directors to issue rules and regulations that are consistent with the economic changes and whenever necessary.
Dr. Omran pointed out that the amendments to the law stressed on updating the conditions and requirements of licensing in accordance with international standards and in a manner that allows the establishment of specialized companies in one of insurance branches such as specialized medical insurance companies (short and long term) or auto-mobile insurance. That is besides updating and developing licensing rules for professions related to the insurance and re-insurance industry in accordance with the best international standards as well as separating tables of employed and unemployed persons. Also, the said law allows the establishment of associations or unions for professions related to the insurance industry and this will enhance its performance. The new draft law adds the agricultural insurance of all types as one of the main insurance branches in order to encourage companies to practice this type of insurance.
And due the importance of optional social insurance system which is represented by the private insurance funds ( the social safety valve) , the draft law provides an optional pension system for a broad group of labor forces. This group which includes about 4.8 members in 2018 and have rights and obligations to be met by more than 570 funds throughout the Republic, with assets of about 70 billion pounds, reserve capital of nearly 65 billion pounds in 2018 and insurance benefits expected to reach 7.5 billion pounds by the end of 2018. Hence, upon preparing the new draft law, the Authority takes into consideration that the amendment shall include the development of mechanisms related to the formation of private insurance funds’ BOD and how to hold and manage their General Assemblies. Besides, increasing levels of transparency and disclosure and applying good governance rules on managing private insurance funds. Also, the said law allows the establishment of special insurance funds according to the three internationally known systems of defined benefits, defined contributions and the mixed method that combines defined benefit and contributions and determine the mechanisms and requirements of transition from one system to another.