The National Bank of Ethiopia (NBE), which is the central bank, has issued a new regulation governing the appointment and conduct of external auditors for insurance companies and the responsibilities of the insurers' directors related to external audits. The directive took effect from 26 March 2026.
The regulation, titled "External Auditor of an insurance company Directive No. SIB/64/2026", stipulates that an insurance company, through its shareholders' meeting, shall select and appoint an external auditor through a competitive bid and in compliance with its own procurement policies and procedures for a one-term of office.
An insurance company may re-appoint the external auditor for the following years within the first appointment, without a competitive bid. However, an external auditor appointed through a competitive bid shall not hold office for more than one term of office in an insurance company
An external auditor may be appointed through competitive bidding for a maximum of two consecutive terms of office (six years). An insurance company may re-appoint an external auditor who served for six years only after the lapse of three consecutive years from the last date of engagement.
An external auditor elected by a subscribers' meeting will hold office until the first annual general meeting of shareholders and may be reappointed at that meeting.
An external auditor appointed by the subscribers' meeting and reappointed by the first annual general meeting for one term of office shall only serve for two consecutive years
Other requirements
Also, to avoid conflict of interest, the directive says that an insurer has to ensure that audit team members were not employees of the insurance company in the last three years. In addition, it has to ensure that the appointed auditor is not granted insurance services, loans, or advances from the company except in the normal course of business at arm's length.
Auditors have to complete "Independence Confirmation" and "Fit and Proper Declaration" forms.
Insurers have to submit to the NBE a written approval request for appointment or re-appointment.
The regulation also sets out the responsibilities of the board of directors of insurance companies with respect to external auditors and the audit process, such as ensuring the auditors have unhindered access to all necessary information. It also spells out external audit reporting and disclosure requirements.
Rationale
The NBE said that it issued the regulation because it is essential to ensure that :
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an insurance company maintains accurate and reliable records and prepares financial statements in line with International Financial Reporting Standards and regulatory requirements
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an insurance company has adequate governance in appointing external auditors
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external audits are performed by qualified and independent auditors.
The central bank also said, “Increased reliance on the works of external auditors is believed to enhance quality and effectiveness of risk-based Supervision.”