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Jul 2022

Tunisia: Regulator seeks presidential decree to enact insurance law

Source: Middle East Insurance Review | May 2022

Tunisia’s General Insurance Committee (CGA) is seeking a presidential decree to pass an amended insurance law that will allow insurers to merge, among other moves, according to its head Hafedh Gharbi. This could halve the number of insurance companies that currently operate in the country.
In an interview with Al-Shorouk, Mr Gharbi said the CGA, which is part of the Finance Ministry, made amendments to the insurance law (Law No. 08 of 2008) which have undergone all the legislative stages, including debate in parliament. However, parliament was suspended before the amendments could be enacted.
In July 2021, Tunisia president Kais Saied sacked the government and suspended parliament. In December 2021, he extended the suspension of parliament until new elections in December 2022, while calling for a July referendum on constitutional reforms. He has since been ruling by decree since last July.
Mr Gharbi added that there is an urgent need for the amended law to be passed quickly. However, he does not rule out the possibility that the passing of the amended law could take place after the elections.
Minimum capital requirement could prod insurers into mergers
Current Tunisian law requires that the minimum capital of an insurance company be at least $3m. Under the proposed legislative amendment, this is to be increased to $20m to improve the solvency of insurers.
Mr Gharbi expects that the new minimum capital requirement, if the law is approved, would prompt the merger of  Tunisian insurance  companies, reducing their current number from 24 to 10-12 companies.
While the CGA enjoys administrative and financial independence, the issuance or withdrawal of insurance licences requires the approval of the Ministry of Finance. The proposed legislative amendment was drafted to grant the CGA complete autonomy.
He added that the CGA is following in the footsteps of the Tunisian Central Bank which made a similar move. The central bank had been subject to the same rule, but it effected a legislative amendment, giving it complete independence and flexibility, and “following this step, we have amended the related clause”.
Savings insurance and takaful
Among the most important amendments to the law are provisions related to life insurance and savings that currently account for 25% of the overall insurance market in terms of premiums. Mr Gharbi said that savings are the most important because they affect the development of the pension system. The proposed legislative amendment aims to improve the retirement income system by promoting private insurance funds.
Takaful is also covered by the amendments that would allow Islamic insurers to set aside reserves. Mr Gharbi said, “According to Islamic law, companies must distribute their takaful surpluses at the end of the year, and if they post losses, they obtain a loan from the shareholders’ fund in favour of the subscribers’ fund, which creates a confusing situation. So, we amended the law regarding this issue.” There are at present only three takaful companies in Tunisia.
“The issue of these surpluses and how to deal with them remains. If they accumulate for several years, then it is assumed that they are invested in legitimate, low-risk sectors such as sukuk, but this does not exist in Tunisia at present,” he added.
Although the law in Tunisia since 2013 has allowed the issuance of sukuk, political instability has prevented Islamic bonds from being issued so far, he said. M 

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