Insurers in Egypt plan to lodge objections to high capital requirements in the proposed new insurance law, following an industry meeting held in late January to discuss legislative amendments.
The Financial Regulatory Authority (FRA) is proposing to increase the minimum capital of life and non-life insurers to EGP150m (US$8.5m) from the existing EGP60m, according to a draft of the new comprehensive insurance law. The EGP150m figure is higher than the EGP100m minimum capital that had previously received a lot of mention. In addition, under the proposed new law, if a P&C insurer wishes to offer oil and aviation insurance, its paid-up capital must not be less than EGP300m.
The Insurance Federation of Egypt (IFE) said it would submit its views to the FRA, a senior member of the group told Al Mal News.
He added that the insurance association considered the proposed capital requirements as excessive. The IFE is suggesting that the minimum capital be set at EGP120m instead so as to encourage investment in the sector. Furthermore, a number of insurers are currently operating effectively with funds ranging from EGP60m to EGP180m.
Another suggestion made by the IFE is for oil and aviation insurance activities to be treated separately. This means that if a P&C insurer wishes to carry out oil insurance only or aviation insurance only, the additional minimum capital required in each instance would be EGP75m instead. In the case where the insurer engages in both activities, the additional minimum capital would be increased by EGP150m.
The IFE official pointed out that the rationale behind the separation of petroleum from aviation insurance is that a large number of property companies are engaged in petroleum business, whereas in aviation, Misr Insurance already dominates 95% of the business.
The association also sees as excessive the proposed requirement for reinsurers to increase their minimum capital by 733% to EGP500m.
In motor insurance, the IFE is asking for an actuarial study to be carried out to ensure that mandatory motor third party liability premiums are in line with the proposed doubling of the amount of compensation to EGP80,000 from EGP40,000 at present. M
EGP1 = $0.06