The National Bank of Ethiopia (NBE) has published the draft Insurance Proclamation No. …/2026 for public comment. The draft introduces a modernized and comprehensive legal framework for the regulation and supervision of Ethiopia's insurance sector. It is designed to enhance policyholder protection, strengthen financial system stability, and foster a fair, safe, and competitive insurance market.
Key Proclamation Milestones
Notably, the draft marks a significant policy shift by proposing the establishment of an independent regulatory authority and opening the sector to foreign participation.
1. Establishment of the Ethiopian Insurance Regulatory Authority
A central reform under the draft is the establishment of the Ethiopian Insurance Regulatory Authority as an autonomous legal entity with perpetual succession. While accountable to the Ministry of Finance, the Authority is granted operational independence and is vested with broad powers to license, regulate, and supervise insurers and insurance intermediaries.
2. Governance and Institutional Framework
The governance structure of the Authority is anchored in a seven-member Board of Directors, which includes the Governor of the National Bank and the Commissioner. Three independent members are appointed by the Prime Minister, subject to strict "fit and proper" requirements, including academic qualifications and a minimum of ten years of managerial experience. The Commissioner serves as the chief executive officer, responsible for the day-to-day administration of the Authority, with a fixed term of six years.
3. Modern Supervisory Approach
The draft adopts a modern supervisory model by empowering the Authority to undertake macro-prudential supervision aimed at identifying systemic risks and addressing market vulnerabilities. It further promotes innovation through the introduction of a Regulatory Sandbox, enabling the controlled and time-bound testing of new insurance products and services under regulatory oversight.
4. Opening the Sector to Foreign Participation
A landmark development under the draft is the partial liberalization of the insurance sector to foreign investors. Foreign insurers are permitted to establish subsidiaries or acquire shares in domestic insurers, subject to defined limits. The aggregate shareholding of foreign nationals is capped at 49%, while a single strategic investor may hold up to 40% of an insurer's subscribed capital. Investments must be made in foreign currency, although dividends may be reinvested in Ethiopian Birr.
5. Prudential Regulation and Risk Management
Insurers are required to maintain a sound financial position by holding capital commensurate with their risk exposure. The draft mandates the establishment of key control functions, including risk management, compliance, actuarial services, and internal audit. In addition, insurers must maintain a statutory deposit of at least 15% of their paid-up capital in cash or government securities with the National Bank.
6. Resolution Framework for Failing Insurers
The Authority is designated as the Resolution Authority, with the power to intervene in cases where an insurer becomes non-viable. The resolution toolkit includes mechanisms such as Official Administration, portfolio transfers, and the creation of bridge insurers. These measures are intended to safeguard policyholders and preserve financial stability during periods of distress.
7. Market Conduct and Consumer Protection
Consumer protection is a key pillar of the draft Proclamation. It imposes regulatory controls on insurance advertising and requires prior approval for new insurance products. Insurers are also held accountable for the actions of their agents in dealings with policyholders, regardless of whether such actions fall within the agent's explicit authority.
Conclusion
Overall, the draft Insurance Proclamation represents a comprehensive overhaul of Ethiopia's insurance regulatory framework. By aligning with international supervisory standards, introducing market liberalization, and strengthening consumer protection, it lays the foundation for a more resilient, inclusive, and competitive insurance sector capable of supporting sustainable economic growth.