Egypt's regulator reviewing proposed hike in minimum capital requirement
Source: Middle East Insurance Review | Mar 2017
The Egyptian Financial Supervisory Authority (EFSA) is reviewing the capital of insurers with an eye to raising the minimum requirement. This is being done in conjunction with the revision in the country’s insurance law.
EFSA Chairman Sherif Samy said that there is a proposal to hike the minimum capital requirement to EGP200 million (US$12.1 million) from the EGP120 million in the earlier draft of the insurance law, reported Al Mal News. Currently the minimum paid-up capital of insurers is EGP60 million.
Mr Samy said that the EGP120-million minimum level is no longer adequate as it was mooted before the flotation of the Egyptian pound last November. The Egyptian pound has since fallen in value by almost 50% against the greenback.
He said that EFSA has reviewed 90% of the draft law, and that the work will be completed soon. When asked whether the proposed EGP200-million figure might be a huge amount to investors wishing to set up new insurance companies, Mr Samy replied that “it is up to them”, pointing out that there are already 35 insurers operating in the market.
The Authority will give insurers adequate time to meet the new capital requirements after details have been finalised.
The need for insurers in Egypt to increase their capital, following the devaluation of the Egyptian pound, was also raised by Mr Abdel Raouf Kotb, Chairman of the Insurance Federation of Egypt.
Mr Kotb said that the financial solvency of insurers, represented by equity capital and reserves, is supposed to at least allow insurers to accept risks associated with assets whose values have risen in local currency terms. This is a direct result of inflation brought about by the depreciation of the Egyptian pound.
The devaluation of the pound was a key requirement of the IMF in order for Egypt to receive a loan of $12 billion over three years.
EGP1 = US$0.06