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FRA’s Board of Directors approves the establishment of Policyholder Protection Funds

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In the framework of the Authority’s efforts to maintain the safety and stability of non-banking financial markets and protect the rights of dealers in these markets, Dr. Mohammed Omran- FRA’s Chairman revealed that FRA’s Board of Directors approved – at its meeting held on 30/7/2018 – the draft of the statue regulation of policyholder protection funds which protects the rights of the policyholders and its beneficiaries. Also, he added that necessary steps will be taken preparing for its adoption and issuance by the competent authority.

FRA’s  Chairman said that this step comes  in concert with the provisions of Law no. 10 of 1981for Insurance Supervision and Control  and in particular Article (43) of the same law which necessitated the establishment of this fund in support of the insurance market against the risk of default , aiming at  increasing  clients’ trust  in the insurance companies and enhancing   the performance of the industry.  In addition, the fund is an unprecedented move and an achievement by all measures in the Egyptian insurance market as it will protect the rights of clients and policy holders. He pointed that such fund will have a great impact on increasing the credit ratings of insurance industry in Egypt.

 On the other hand, this step comes within the framework of implementing the National Strategy for the Non-banking Financial Services Sector and achieving several strategic objectives, including strengthening the legislative framework for activities under FRA’s supervision as well as achieving better management of risks related to the safety and stability of non-banking financial markets. Also, FRA’s Chairman added that insurance is one of the most important tools in managing economic and natural risks and preserving the productive assets of the national economy.

 Dr. Omran empathized  that the Authority is  in the final phase of  preparing  a system that  protects  clients of insurance companies, which will also include the preparation of  a guide that is related to protecting  clients dealing with  insurance companies and private insurance funds in accordance with international standards in this regard. Adding that  such steps will  help in achieving  several strategic objectives related to  raising  awareness of the financial and cultural levels, improving levels of transparency and governance, improving the competitiveness and development of non-banking  financial markets.

Counselor Reda Abdal moaty – FRA’s Deputy Chairman noted that approving the  Fund’s Regulations is a step towards  the development of the Egyptian insurance market that  will be followed by several steps in the next phase which will focus mainly on developing  legislations on insurance ,reinsurance , private insurance funds and Compulsory Auto Liability Insurance Law. He added that this will be clearly shown through the preparation of a draft unified law of the activity.  Also, he explained that Policyholder Protection Funds aims at paying compensations to policyholders or beneficiaries in cases arising from the company’s failure to fulfill their obligations towards policyholders or beneficiaries.

FRA’s Deputy Chairman explained that the fund’s activities will be financed through a membership fee of LE 50,000 paid once by each insurance company listed at FRA’s registry, in addition to only two in thousand of the total premium. He added that FRA was taking into account that financing shall be simple and shall not represent a burden at all. On the other hand, he stressed that the Compulsory Auto Liability Insurance was excluded from participating in this fund because there is an independent system set for Compulsory Auto Liability Insurance and it has its independent fund and is also financed by insurance companies.

Counselor Reda Abdal moaty pointed out that the Fund will compensate policyholders and / or beneficiaries up to a maximum of 80% of the value of compensation per policy  in cases arising from the  company’s inability to meet its obligations towards  policyholders and beneficiaries including cases  of license revocation , delisting  , bankruptcy or liquidation after proved that the assets and resources of the company is not sufficient to fulfill all its commitments towards policyholders and beneficiaries .  Also, he emphasized that the Fund may compensate its members through transferring their policies -by the same terms and conditions- to another company licensed to carry on insurance business in Egypt on condition that the company assigned thereto shall approve that transfer, and in particular long-term policies.

FRA’s Deputy Chairman confirmed that the Fund will be subjected to FRA’s full supervision without interference in its management which will be carried out by the insurance industry according to the approved regulations, where the number of the Fund’s Board of Directors will not exceed 7 members in accordance with international standards in this regard.  He added that these funds were established in most countries of the world as illustrated by the studies conducted by the Authority and Insurance Federation of Egypt during the past period which resulted in the statute approved by FRA’s Board of Directors at its meeting dated 30/07/2018.
 

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Regulator Information

Abbreviation: FRA
Jurisdiction: Egypt

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