The current status of the insurance sector in Egypt

(A)The current status of insurance sector in Egypt Market structure Life insurance Non-life insurance Reinsurance Investments Regulation and supervision of insurance

Market structure The Egyptian Insurance Market composes of :- The Supreme Council of Insurance The Egyptian Insurance Supervisory Authority (EISA) 17 direct insurance companies, 6 of which are composite, 6 are non-life, 3 are transacting life insurance, one is transacting credit insurance for exports and one cooperative society Another 2 new life insurance companies have just licensed A specialized reinsurance company 614 Private Insurance Funds The Government Insurance Fund for fidelity guarantee Insurance Federation of Egypt Insurance Pools Cargo supervision & surveying office of Egypt

The Supreme Council of Insurance FORMATION Formed under the chairmanship of the Minister of Planning and the membership of : - The chairman of EISA and his deputy - The Chairmen of the insurance and reinsurance companies - A representative of the insurance funds. - Two insurance Professors from the Egyptian Universities. - A Chancellor from the Council of State - A representative from the Public Sector Information Center. Ministry of Planning Ministry of Finance the trade unions organization of the insurance sector each of the auxiliary organs

ROLE The Supreme Council of Insurance has the competence to decide the general objectives of the insurance activity and to approve the policies needed for the achievement of these objectives.

The Egyptian Insurance Supervisory Authority (EISA) EISA has the competence to supervise and control the insurance activity in Egypt whether at the establishment, during transaction or at the termination of the business. The Authority in particular aims at the implementation of the following objectives :- 1- to protect the rights of insurance policyholders, the beneficiaries and third parties. 2 - to secure the achievement of the economic and social objectives of insurance activity and preserving the national savings.

3 - to secure the soundness of the financial positions of the Insurance market units, coordinating among them and preventing any conflict between them. 4 - to participate in developing insurance awareness in the country 5 - to strengthen the ties of co-operation and integration with the other control and supervisory authorities at the Arab, African, and world level. 6 - to promote the insurance professions and to contribute effectively to the availability of the expertise.

Insurance Companies No.Paid-up Capital Shareholder’s Fund Policyholder’s Fund Total Assets Premium Income State Owned Composite Private Composite Private Non-life Private Life Cooperative Credit Medical Reinsurance state owned Total Private Funds Market Structure Table 02/03 Figures (in L.E. Million) The premium income for Egypt Re is not added to the total premium income The foreign participation of the paid up capital represents 12.3%

LIFE INSURANCE

Life Insurance Business (in L.E. 000)

NON-LIFE INSURANCE

REINSURANCE

Reinsurance

INVESTMENTS

Regulation and supervision of insurance

Legislation The main insurance legislation regulating the insurance market are Act No. 10 of 1981 for the supervision and control of insurance in Egypt and its amendments by the Act No. 91 of 1995 and Act No. 156 of 1998 Act No. 54 of 1975 for the Private Insurance Funds and its regulations Act No. 652 of 1955 for Motor Liability Insurance

Status as regards liberalization and privatization Act No. 156/1998 allows private sector entry into the capital of the state-owned insurance and reinsurance companies The Act also removed all restrictions on majority foreign ownership of insurance companies It also allows non-Egyptians to manage insurance companies based in Egypt It is worth to mention here that 8 companies are managed by foreign managing directors

Status as regards Financial Sector Assessment Program Detailed Assessment Report on Observance of the Insurance Core Principles and Transparency of Insurance Regulation was prepared by a lead insurance specialist from Financial Sector Department of the World Bank. The assessment was based on a review of the legal framework, and focused mainly on the supervisory work of the Egyptian Insurance Supervisory Authority. As a result, and according to EISA’s adopted plan of enhancing the supervision standard in an open market and increased competition, the following new regulatory decrees have been issued : -

1.The Ministerial decree No.157 for 1999 for the issuance of the Accounting Measures for Insurance and Reinsurance companies. 2.The Ministerial decree No. 157 for 2003 amending the executive regulation by adding an article for setting up an internal control committee and applying the principles of corporate governance. 3.According to article (7) of law No.80 of 2002 for combating money laundering, the rules and measures as well as the executive procedures for insurance and reinsurance companies have been issued.

EGYPT SCHEDULE OF SPECIFIC COMMITMENTS Modes of supply: (1) Cross-border supply (2) Consumption abroad (3) Commercial presence (4) Presence of natural persons Insurance Services, the main criteria which the economic needs test apply are as follows: 1.Surplus demand to traditional classes of insurance gives new companies an opportunity of working without harmful competition to the market or financial positions of existing companies and consequently policyholders 2.Exhausting of 50% of the capacity of the existing companies, which is calculated on the basis of solvency margin, and there is a surplus demand in excess of the capacity which enables a new company to achieve its purposes. 3.Setting up of a new company leads to an increase of total retention in the market; taking into account the technical considerations. 4.The new companies shall introduce new insurance covers.

Sector or subsectorLimitations on market access Limitations on national treatment Additional commitments 1. Life, health, personal accident (1)None (2)None (3)Foreign and joint venture companies are allowed only to carry on business in free zones, provided that their activities shall be confined to the transactions carried out in convertible currencies. No maximum limits required on the foreign shareholding in free zones Economic needs test shall apply to the inland commercial presence (other than in free zones) according to the criteria as stipulated in the horizontal section. (1)None (2)None (3)None

Sector or subsector Limitations on market accessLimitations on national treatment Additional commitments Relaxation of economic needs test shall be in 2000 for life, health & personal accident business Foreign insurance companies’ branches and agencies are not allowed. Foreign capital equity shall not exceed 49% of the total capital required for the company (other than in free zones) up to 31 December As of 1 January 2000, foreign capital equity shall be up to 51% of the total capital required for the company (other than in free zones). Legal cessions of the total transactions must be ceded to Egyptian Reinsurance Co. according to the percentages to be

Sector or subsector Limitations on market accessLimitations on national treatment Additional commitments 2. Non-life insurance decided by the supervisory authority and 5% of the company’s treaties to African Reinsurance Co. (4) Qualified non-Egyptian directors are allowed for a five-year term and may be renewed. Their appointment and renewal is subject to the approval of the Supervisory Authority. (1)Unbound (2)None (3)Foreign and joint venture companies are allowed to carry on business in free zones, provided that their activities shall be confined to the transactions carried out in convertible currencies. (4) A non-Egyptian director must have at least two Egyptian understudies. Unbound None

Sector or subsector Limitations on market accessLimitations on national treatment Additional commitments No maximum limits required on the foreign shareholding in free zones. Economic needs test shall apply to the inland commercial presence (other than in free zones) according to the criteria as stipulated in the horizontal section. Relaxation of economic needs test shall be in 2002 for non-life business. Foreign capital equity shall not exceed 49% of the total capital required for the company (other than in free zones) up to 31 December As of 1 January 2003, foreign capital equity shall be up to 51% of the total capital required for the company (other than in free zones). Foreign insurance companies’ branches and agencies are not allowed.

Sector or subsector Limitations on market accessLimitations on national treatment Additional commitments 3. Reinsurance and retrocession Legal cessions of the total transactions must be ceded to Egyptian Reinsurance Co. according to the percentages to be decided by the supervisory authority and 5% of the company’s treaties to African Reinsurance Co. (4) Qualified non-Egyptian directors are allowed for a five-year term and may be renewed. Their appointment and renewal is subject to the approval of the Supervisory Authority. (1)None (2)None (3)Foreign and joint venture companies are allowed to carry on business in free zones and inland, and in the case of carrying on their activities in free zones, their transactions shall be confined to be carried out in convertible currencies. (4) A non- Egyptian director must have at least two Egyptian understud ies. None

Sector or subsector Limitations on market accessLimitations on national treatment Additional commitments 4. Auxiliary services other than intermediation: a. Actuarial services No maximum limits required on the foreign shareholding in free zones or inland. Foreign reinsurance companies’ branches and agencies are not allowed. Insurance and reinsurance companies are not allowed to deal with reinsurers not listed in the supervisory authority list. 5% of the company’s treaties must be ceded to African Reinsurance Co. (4) None (1)Unbound (2)Unbound (4) None Unbound

Sector or subsector Limitations on market accessLimitations on national treatment Additional commitments b. Consultancy (risk assessment and risk management only) c. Loss assessment (3) Foreign service supplier must be authorized to perform this profession from a competent authority in his home country and registered at the Egyptian register for that purpose (4) None (1)None (2)None (3)Foreign service supplier must be authorized to perform this profession from a competent authority in his home country and registered at the Egyptian register for that purpose (4)None (1) Unbound (2) Unbound (3) None (4) None None (1) Unbound (2) Unbound

Sector or subsector Limitations on market accessLimitations on national treatment Additional commitments d. Iaison offices 5. Intermediation (3) Foreign service supplier must be authorized to perform this profession from a competent authority in his home country and registered at the Egyptian register for that purpose (4) None (1)None (2)None (3)Commercial presence is bound only for public relations and market research. (4)None (1) Bound only for life insurance and reinsurance services. (2) Bound only for life insurance and reinsurance services. (3) Unbound (4) Unbound (3) None (4) None None (1) None (2) None (3) Unbound (4) Unbound

The Effects of Liberalization 1.The Foreign owned shares in 2002/2003 was 12.3% of the insurance market capitals and 54.6% of the private sector capitals 2.Their share of the life insurance premium was 23% of the whole market and 73.1% of private sector 3.Their share of the non-life insurance premium was 10.8% of the whole market and 42% of private sector 4.There are 8 foreign managing directors leading 8 insurance companies 5.There are another 8 foreign chairmen and deputy chairmen 6.Two foreign actuaries and 2 loss adjusters obtained licenses and registered in EISA’s register