Egypt's Financial Regulatory Authority (FRA) is allowing life insurance companies to invest directly in precious metals, including gold, in a decision that is the first of its kind in the Egyptian market.
Investments in precious metals will be carried out under a strict regulatory framework aimed at maximising returns for policyholders and protecting customer rights, reported Al Mal News. It permits insurers to place the investment-linked portions of their policies — as well as money allocated under savings and capital-building policies — into gold and other precious metals.
FRA chairman Dr Mohamed Farid said that the move comes amid a shifting investment environment in the market and aligns with the Authority’s goal of balancing innovation and risk management. He added that the move also seeks to provide safe investment options for citizens, such as gold, a usual safe-haven asset.
The rules stipulate that insurers must first secure the regulator’s consent regarding the specific metals they intend to invest in, the expected returns and the liquidity levels needed to cover their obligations. They also limit the buying, selling and storage of these metals to entities listed in the Authority’s official registry. In addition, companies are required to deal exclusively in metals certified by the relevant authorities and priced according to recognised indices.
The FRA also stressed the need to periodically evaluate life insurance companies’ investments in minerals through the management service companies. The insurers will also have to include in their annual and quarterly reports details of investments in metals, their percentage of the total investment portfolio, the returns achieved, and the costs specific to each metal separately.
Mr Alaa El-Zohairy, Chairman of the Insurers Federation of Egypt, said, "The decision of the Financial Regulatory Authority represents an important step towards developing investment tools for insurance companies and opening new areas to maximise returns in a way that serves the interests of policyholders."