The Financial Regulatory Authority (FRA) issues a decision to increase the minimum capital of insurance companies to enhance financial solvency and as part of the implementation of the Unified Insurance Law. Insurance companies are required to increase their capital to EGP600m ($11.9m) within two years.
On 19 January, the Board of Directors of the Financial Regulatory Authority (FRA) has issued resolution No.196 of 2024 regarding determining the minimum capital of companies operating in the insurance sector, in implementation of the provisions of the Unified Insurance Law issued in July 2024.
The decision obliges companies operating in the insurance sector to raise the minimum issued and paid up capital in two phases over a period of two years to reach EGP400m ($8m) in the first phase, which takes place within a year from the date of implementation of the decision, and then increase the capital in the second phase to reach EGP600m by the end of the second year from the date of implementation of the decision.
The decision also set the minimum capital of property and liability insurance companies practicing any of the branches of oil, aviation or energy insurance, at about EGP400m in the first phase within one year from the date of implementation of the decision, provided that the value increases by EGP50m for each branch to be practiced, then the capital is increased to EGP600m, within two years of the decision to be increased by EGP50m for each branch practiced.
The resolution also obliges all companies to prepare a timetable explaining the stages of increasing their capital in accordance with the provisions of the resolution and to provide it to the Authority within one month from the date of its entry into force. The FRA has also prohibited for such companies to distribute any cash dividends to their shareholders before meeting the minimum capital requirements referred to except after obtaining a no-objection from the Authority.
Cap required for micro, monoline health insurers and insurance-related providers
The decision obligated the rest of the companies addressed by the decision to reconcile their positions within a year from the date of its entry into force, as the minimum capital of microinsurance companies was set at EGP40m and the decision set a minimum capital for insurance companies specialised in one of the insurance branches at EGP75m, and the decision set the minimum capital for specialised medical insurance companies at EGP75m. For reinsurance companies, the minimum capital requirement is being set at EGP1bn.
The decision stipulates setting the minimum capital for companies engaged in insurance-related professions and activities, provided that the minimum capital of medical insurance programme management companies (TPA) is EGP20m, insurance and reinsurance brokerage companies at EGP5m, risk assessment expertise companies, inspection and damage assessment expertise companies (loss adjusters), insurance consulting expertise companies and actuarial expertise companies at EGP3m each.
Reinforcing solvency
Increasing the capital of insurance companies comes aims to enhancing the solvency of companies and improving their ability to insure greater risks driven by a strong capital base that contributes to improving the levels of financial stability of the insurance sector, said the FRA. The increase in capital would also supports efforts to increase levels of insurance coverage. The decision also enables companies to develop their IT systems which helps them to provide the best possible service, in addition to increasing the company's ability to fulfil its obligations towards policyholders.
The capital of all companies addressed by the resolution shall be fully paid in EGP or its equivalent in foreign currencies accepted by the Central Bank of Egypt, said the FRA statement.