Egypt's Financial Regulatory Authority (FRA), has introduced new investment rules and ratios for the funds of insurance and reinsurance companies.
The FRA has said that the new regulations will apply to all entities engaged in insurance, reinsurance, takaful insurance, specialised medical insurance, microinsurance, and any other specialised insurance activities as defined by the Unified Insurance Law No 155 of 2024.
Under the revised rules, insurance and reinsurance companies must allocate a minimum of 5% of their free funds to open-end investment funds focused on listed stocks on the Egyptian Exchange (EGX). With FRA approval, direct investments in listed stocks may contribute to this 5%, provided that investments do not exceed 5% of the company’s paid-up capital or 15% of a fund’s net asset value, whichever is lower.
Free funds refer to shareholder equity, while allocated funds represent the obligations of insurance companies toward policyholders and beneficiaries. For allocated funds, companies are required to invest at least 2.5% of their paid-up capital in open-end investment funds that specialise in listed stocks. The same investment caps—5% of paid-up capital or 15% of a fund’s net asset value—apply. With FRA approval, direct stock investments may also fulfil this 2.5% requirement. However, total investments in stocks and open-end investment funds must not exceed 30% of allocated funds.
The decision also imposes a 5% limit on investments in commodity and metal funds or any exchange-traded instruments backed by metals on EGX.
Life insurance companies will be allowed to invest up to 10% of their invested funds in real estate funds, while property and liability insurers are limited to 5%. Given the long-term nature of life insurance investments, the same 5% or 15% cap applies to investments in individual real estate funds. However, these restrictions do not apply to real estate funds established by insurance companies themselves.
The FRA has also issued regulations for investments tied to unit-linked insurance policies, where companies must now segregate these investment-linked funds into independent accounts managed through a dedicated electronic system. Additionally, they are required to maintain a detailed investment register that includes policy numbers, client names, invested amounts, investment instruments, portfolio returns, and any other data requested by the FRA.
To ensure regulatory compliance, insurance companies must submit their investment policies to the FRA annually and notify the authority of any amendments. They are also required to provide regular investment reports that adhere to the highest governance standards, reinforcing policyholder and beneficiary rights.
Additionally, all companies must adopt an investment policy approved by their board of directors and, for takaful insurers, their Sharia supervisory board.
The FRA hopes that these new measures will enhance confidence in the insurance market by ensuring the prudent management of insurance company funds, striking a balance between maximising returns and protecting customer interests.