NBE issues directives for establishment of reinsurance companies

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Addis Ababa, 4 April 2014 (WIC) - The National Bank of Ethiopia (NBE) has issued directives that enable to establish national reinsurance companies effective from May 1, 2014.

Reinsurance is insurance that is purchased by an insurance company  from one or more other insurance companies as a means of risk management.

NBE Insurance and Supervision Director, Temesgen Zeleke, told journalists here yesterday that the directives were issued due to the economic growth of the country and increasing demand of insurance coverage.

The establishment of national reinsurance companies would promote financial resource mobilization and reduce costs related to cross boarder reinsurance transactions, he added.

Moreover, the companies would simplify settlement of claims and payment of ceded premium in domestic currency within the shortest possible time, he said.

According to the directives, a reinsurance company shall be established as a share company stipulated in the commercial code of Ethiopia and it shall be run as a non-life and life reinsurer.

The reinsurance company should be wholly owned by Ethiopian nationals and/or organizations owned by Ethiopian nationals.

The minimum paid up capital required to obtain license for a reinsurance company shall be 500 million birr, it was noted.