The National Bank of Ethiopia, the central bank, has published a draft Insurance Proclamation, that would re-open the domestic insurance market to foreign insurers.
The objective is to sharpen competitiveness, introduce sophisticated risk management tools, promote innovation and expand access to insurance. The insurance penetration currently stands at 0.3%.
According to the 159-page draft, foreign insurers can establish wholly or partially owned subsidiaries and acquire stakes in domestic insurers. Strategic investors are limited to a maximum stake of 40% in local companies, with aggregate foreign ownership capped at 49%.
The draft says that as the insurance market plays an important role in economic development by providing policyholders with protection, “it is necessary to adopt a legal framework for the regulation and supervision of the insurance market for the protection and security of policyholders and the customers of insurance intermediaries, to strengthen confidence in the insurance market, to promote a fair, safe, efficient and stable insurance market and to contribute to the stability of the financial system”.
The draft also provides for the establishment of an independent Ethiopian Insurance Regulatory Authority (EIRA), to be responsible for the licensing of insurers, prudential supervision, consumer protection, and an effective resolution regime to handle insolvent insurers.
Other provisions cover a regulatory sandbox for innovation, a comprehensive framework for takaful and re-takaful, and a new licence for inclusive insurers that target underserved segments.
Ethiopia’s insurance sector comprises around 20 insurers and one reinsurer.
In 1970, the government issued a proclamation that required all insurance companies to be domestic to operate in Ethiopia. In 1975, it nationalised all 13 private insurance companies operating at the time and merged them into a single state-owned monopoly. In 1994, Ethiopia reopened its doors to private-sector insurance companies, ending the monopoly of the state-owned insurer.
The Ethiopian government opened up the banking sector to foreign players in December 2024.