Amhara Bank, incorporated in June 2022, and other promoters are working to establish an insurance company in Ethiopia with a paid-up capital of ETB2bn ($37.7m), the largest amount of initial capital for a new insurer in the country.
The founding committee, which has 34 members, is completing plans to make the insurance entity, to be called Amhara Insurance, a reality, with a target to involve both life and non-life lines of business, according to The Reporter.
The new insurer will be the 18th to operate in Ethiopia. It plans to commence operations with both life and non-life insurance products.
Committee secretariat member Solomon Alebachew said the next step would be to float shares after submitting complete information on the founding committee to the Ethiopian National Bank which is the central bank.
If the licence is approved, Amhara Insurance will be the first new insurer to be established with this much capital. Insurance companies that entered the market three decades ago were formed with a paid-up capital ranging from ETB3m to ETB15m.
At present, the highest paid-up capital held by an insurance company is ETB4bn.
There are currently 16 private-sector insurance companies operating in Ethiopia. They compete with each other and with state-owned Ethiopian Insurance Corporation which was established in 1976 and had a monopoly of the insurance market in the country until 1994.
Minimum capital requirements
Ethiopia re-opened its doors to private-sector insurance companies in 1994. At that time, the minimum required capital was ETB3m which was subsequently increased to ETB75m for composite insurers in 2013.
In September 2022, the minimum capital requirement to obtain a general insurance licence was increased to ETB400m, up from ETB60m. The minimum capital for long-term insurance licences was also raised – from ETB15m to ETB100m.
An insurer needs to have a minimum capital of ETB500m for a composite licence, hiked from ETB75m previously. Insurers whose paid-up capital is below the new threshold have until 30 June 2027 to comply with the new guidelines. The previous minimum capital requirements remain applicable – until 15 September 2023 – to new insurance companies that are in the process of underwriting shares. M