Introduction

Ethiopia's Ethiopian Insurance Corporation (EIC) is widely regarded as the country's most
dependable and financially sound insurance company. The following article provides an outline of
Ethiopian Insurance Corporation's history and present state.

The emergence of modern insurance business in Ethiopia traced back to the establishment of the
first bank which was called Bank of Abyssinia in 1905. After many years of dragging feet in the
business, the first domestic insurance company, namely Imperial Insurance Company was
established in 1951.

Ethiopian Insurance Corporation has diversified contacts with international insurers, associations
of insurance, reinsurance pools, and reinsurance companies. In addition, it accepts inward
insurance business coming from various international insurance companies and deals with
Outward reinsurance business with the most renowned international re-insurers.

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 THE INSURANCE BUSINESS IN ETHIOPIA

DEVELOPMENT OF INSURANCE IN ETHIOPIA

Traditional protection of risks in Ethiopia can be found in the form of Edir and Equib were people
get in some financial contribution to save themselves and losses of properties from unexpected
troubles in the future.

According to some researches year 1951, marked the beginning of a new chapter in the history of
Insurance industry in Ethiopia in that it witnessed the launching for the first time entirelyowned
by Ethiopians called “Imperial Insurance Company” formed by the initiatives taken by some
enlighten Ethiopians and the expatriates, which brought significant development in financial sector
of the economy lead to the coming in to existence some eighteen company in 1954 operating in
different parts of Ethiopia engage in offering coverage for life, marine, motor and fire or property
Insurance services.

Proclamation No. 281/70 which was the first Governmental act on the supervision of Insurance
business in the country brought about a significant change, in that the government put the
governmental control in place for it feel the promotion and protection of the public Interest was
timely as the scope of Insurance business in the country expanded and Insurance registration
license was setup under the Minster of trade and Industry tourism.

Insurance business in its modern sense in Ethiopia started in 1905 when the then Bank of Abyssinia
got underwriting authority in the form of Agency for Fire and Marine Insurance business. The first
local insurance company was formed in 1951. Later on the number of insurance companies reached
15 of which two withdrew from business in 1972.

As a result of nationalization of these companies in 1975, Proclamation No. 68/1975 was declared
to form the Ethiopian Insurance Corporation with a capital of Birr 11 million. Since
nationalization, its premium production on the average has continuously grown at the rate of 26.5%
in 1976 to Birr 300 million in 1994/95. While its claims increased from 20 million in 1976 to Birr
160 million in 1991/92.
With the declaration of Proclamation No. 86/94, which allowed the licensing and supervision of
insurance companies, there emerged seven more than private insurance companies with a total
capital of nearly Birr 205 million. The total market that was Birr 50 million in 1976 reached Birr
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345 million in two decades’ time. These insurance companies have reinsurance arrangements with
reputable international re-insurers mainly from Munich Re., Swiss Re., etc.

Though there is a growing performance in the industry over the last few years, the industry is
facing some problems. The major problems of the existing insurance companies in Ethiopia today
are listed below in the order of importance:

I. Lack of adequate public awareness

II. Shortage of skilled manpower
III. Price cutting
IV. Lack of professional ethics

INSURANCE COMPANIES AND THEIR OPERATION

1.National Insurance Company of Ethiopia (NICE)

NICE, which started in the insurance business in October 1994, is the first wholly privately owned
insurance company, established in post 1994 Ethiopia.

National Insurance Company has a head office is in Addis Ababa, Ethiopia, and operates through
38 branch offices and 4 licensed contact offices located in Addis Ababa as well as in, different
parts of the country.The authorized capital of the company is 100,000,000 ETB or 10000 shares
of 1000 ETB par value each.

Currently, the paid up capital of the company stands at 80,383,216 ETB, with the minimum
shareholding is 50 shares, while the maximum shareholding allowed by law is 5% of the capital.
Shareholding is permitted for Ethiopian Nationals only at the time.

National Insurance Company's Services

 Fire & Allied Perils

 Consequential Loss
 Householders, Comprehensive
 Workmen’s Compensation
 Fidelity Guarantee
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  Personal & Group Personal Accident
 Public Liability
 Money
 Plate Glass etc

2.Nile Insurance Company Share Company (NICSC)

Nile Insurance Company is one of the pioneer private insurance companies in Ethiopia which was
established on April, 1995 with a capital of 12.5 million ETB.

Over the years, Nile has grown from 12.5 million ETB to 302 million ETB capital, from 26 to 136
shareholders, from 4 to over 42 branches both in the capital Addis Ababa and in regional cities
and has more than 45,000 customers across Ethiopia.The total assets of Nile Insurance Company
have risen from 734 million ETB to 1.24 billion ETB.

This huge leap of market share in the Ethiopian insurance sector was mostly driven by the active
participation of its employees, customers, shareholders, and other stakeholders.

Nile provides both general and long term insurance solutions along with engaging in promising
investments across the country.

Nile Insurance Company's Services

 Engineering
 Bond
 Cargo Insurance (Land, Sea and Air)
 Fire Insurance
 Personal Accident Insurance
 Workmen Compensation Insurance

3.Oromia Insurance Company (OIC)

Oromia Insurance Company was established and licensed by the National Bank of Ethiopia on
January 26, 2009 in order to engage in Ethiopian general insurance business.

OIC was established by 540 founding shareholders and a paid up capital of 26 million ETB and a
subscribed capital of 85 million ETB.
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By the end of 2016/17 FY, the number of shareholders reached 840, while the paid up capital rose
to 155.2 million ETB and the subscribed capital also rose to 250 million ETB.

Oromia Insurance Company began with a strong and reliable financial capacity, making it the first
of its kind to mobilize such a large amount of paid up capital in Ethiopia’s insurance industry.

Furthermore, the diversity of its shareholders proves OIC’s strong social base of which is also
made up of 1,600,000 low income farmers through their farmers’ cooperative unions.

OIC also launched Micro insurance products (crops & livestock) in 2010, i.e., a year after its
establishment. Life Insurance operations would soon follow in 2012.

Currently, Oromia Insurance Company has 38 branch offices and 3 contact offices throughout
Ethiopia. The company also works with a number of sales agents, insurance brokers, as well, as
banks.

Oromia Insurance Company's Services

 Group/Individual Term
 Group Endowment
 Mortgage Protection Insurance
 Whole Life
 Ordinary Endowment
 Pure Endowment

4.Ethiopian Insurance Corporation (EIC)

Ethiopian Insurance Corporation was established in 1976 by proclamation No.68/1975.

The Corporation came into existence by Derg government taking over all the assets and liabilities
of the thirteen nationalized private insurance companies, with 11 million ETB or 1.29 million USD
paid up capital targeting the following objectives.

• To take part in all classes of the insurance business in Ethiopia;

• To spread the benefits of insurance to all people in Ethiopia fairly;

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Subject to the provision of Article 18 of the Housing and Saving Bank establishment proclamation
No. 60/1975, that stipulates to promote efficient use of both material and financial resources.

EIC has been in the Ethiopian insurance sector for 19 years as a state owned sole insurer. After the
demise of the Marxist regime in mid-1991 a fundamental change has taken place and there was a
shift in political, economic and social orientation from totalitarianism to that of liberalism.

Therefore, the Ethiopian Insurance Corporation was reestablished as public enterprise under
proclamation number 201/94 and with 61 million ETB or USD 7.13 million USD paid up capital.

Ethiopian Insurance Corporation's Services

 Long term insurance

 Individual long term insurance policies

• Term Life Assurance

• Ordinary Endowment
• Endowment Annuity
• Whole Life Assurance
• Children’s Education (with profit)
• Anticipated Endowment (with profit)
• Mortgage Protection Assurance
 Group long term insurance policies
• Ordinary Group Term Assurance
• Modified Large Group Term Life Assurance
• Group Endowment
• Group Medical Assurance

5.Nyala Insurance Share Company (NISCO)

Nyala Insurance Share Company was established in July 1995 following the liberalization of the
Ethiopian insurance business to the private sector in 1994 with the Licensing and Supervision of
Insurance Business Proclamation No. 85/1994.
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Over the years Nyala Insurance has become one of the leading private insurance companies in
Ethiopia with 300 million ETB subscribed capital, and over 20 years of experience in Ethiopian
insurance operations.

Nyala Insurance Share Company's Services

• Life Insurance
 Group Yearly Renewable Term
 Individual Term Insurance
 Medical Insurance Cover
 Mortgage Protection
 Comprehensive Accident
 Endowment Assurance
• Non-Life Insurance

6.Africa Insurance Company (AICSC)

Africa Insurance Company has been in the Ethiopian insurance market since the new post
communism proclamation making it one of the pioneers in the business.

AIC had the initial paid up capital of 15 million ETB that of which has grown tremendously to the
current paid up capital of 178.6 million ETB.

Africa Insurance Company's Services

 Life
 Accident & Health
 Motor
 Aviation
 Marine
 Fire & General Accident
 Engineering
 Pecuniary
 Liability
 Agriculture
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  Workmen's Compensation

7.Awash Insurance Company (AIC)

Awash Insurance Company S.C. (AIC) was founded in October 1, 1994, making it one of the first
insurance companies in the modern market.

Awash is involved in the general insurance and long-term (life) insurance business, with its
ownership structure comprising of a private share company with more than 1,349 individuals and
corporate shareholders.

AIC's capital is currently 411.42 million ETB as of March 28, 2020, with assets in the range of 2.2
billion ETB.

Awash Insurance now has over 566 (260 female and 306 male) permanent employees, with a sales
force of 476, in 47 branch offices and 6 underwriting offices spread all across Ethiopia.

Awash Insurance Company's Services

Life Assurance Business(Long-Term Insurance)

1. TERM ASSURANCE;
 Individual and Group Life

2. WHOLE LIFE;

3. ENDOWMENT ASSURANCE;

 10, 15, 20 ... Years Endowment;

 Anticipated Endowment,
 Endowment Annuity and
 Education Policy

4. MEDICAL EXPENSES INSURANCE;

5. RIDERS;

 Accident Insurance,and Waiver of premium.

 Supplementary Accident Insurance(SAI).
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  Comprehensive Accident Insurance(CAI).

6. TRAVELERS HEALTH INSURANCE

 Awash Insurance Company(S.C) transacts Non-life as follows:

7. General Insurance (Non-Life):

 Motor (private & commercial);

 Fire & Lightning and Allied perils;
 Consequential Loss;
 Burglary & Housebreaking;
 Marine Cargo;
 Workmen's Compensation (Employers' Liability);
 Personal and Group Personal Accident;

REGULATION OF INSURANCE COMPANIES

PROCLAMATION NO.746/2012

It is proclamation to provide for insurance business where as, the insurance sector plays an
important role in economic development through providing insurance coverage against risks, the
provision of alternative means for savings and mobilization of financial resources from within and
outside the country; whereas, to ensure the reliability and stability of the insurance sector, it has
become necessary to put in place a comprehensive legal framework; now, therefore, in accordance
with article55(1) of the constitution of the federal democratic republic of ethiopia, it is hereby
proclaimed as follows:

[Article] 57. Penalties

Unless otherwise a higher penalty is imposed by the Criminal Code:

1/ any person who contravenes the provisions of sub-article (1) of Article 3 of this Proclamation
shall be punished with a rigorous imprisonment from ten to fifteen years and with a fine of Birr
20,000 in respect of each day on which the contravention continues;
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2/ any person who, having been called upon by the National Bank under sub-article (4) of Article
3 of this Proclamation, fails or refuses to submit the documents described therein shall be punished
with a rigorous imprisonment from seven to ten years and with a fine from Birr 50,000 to Birr
100,000;

3/ where the offence under sub-article (1) or (2) of this Article is committed by a legal entity, the
penalty of imprisonment shall be imposed on the person in charge of the management of the entity;

4/ any person who contravenes the provisions of sub-article (1) or (2) of Article 16 or Article 17
of this Proclamation shall be punished with a rigorous imprisonment from ten to fifteen years and
with a fine from Birr50,000 to Birr100,000;

5/ any director of an insurer who contravenes the provisions of sub-article (6) of Article 33 of this
Proclamation shall be punished with a rigorous imprisonment from seven to ten years and with a
fine from Birr50, 000 to Birr100, 000;

6/ any director or employee of an insurer who:

a) obstructs the proper performance by an auditor of his duties in accordance with the provisions
of this Proclamation or examination of an insurer by an inspector duly authorized by the National
Bank;

b) with intent to deceive, makes any false or misleading statement or entry or omits any statement
or entry that should be made in any book, account, report or statement of an insurer; or

c) knows or ought to know the insolvency of the insurer and issues or authorizes or permits the
issuance of a policy;

shall be punished with a rigorous imprisonment from ten to fifteen years and with a fine from
Birr50,000 to Birr100,000.

7/ any person who contravenes or obstructs the implementation of other provisions of this
Proclamation or regulations or directives issued hereunder shall be punished with an imprisonment
up to three years and with a fine up to Birr10, 000.
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PROCLAMATION NO.591/2008

P[Article] 26. Penalties

1/ Whosoever:

a) in violation of the provisions of this Proclamation or regulations or directives issued pursuant

to this Proclamation:

(1) engages in transactions of foreign exchange or fails to declare to a bank or authorized dealer
when he acquires foreign exchange or the right to receive foreign exchange;

(2) receives or effects payments in foreign exchange;

(3) delays his receipt or extinguishes his right to receive foreign exchange;

(4)leaves or attempts to leave or enters or attempts to enter Ethiopian territory carrying Ethiopian
currency in excess of the amount fixed or authorized by the National Bank; or

(5) is found carrying foreign exchange in excess of the amount fixed or authorized by the National
Bank;

b) with intent to evade the provisions of this Proclamation or regulations or directives issued
pursuant to this Proclamation or to distort their application destroy, tears apart, alters, deletes or
hides a document or produces false evidence or makes false declaration;

c) discloses information in violation of Article 22 of this Proclamation; or

d) in any other manner violates or obstructs the implementation of this Proclamation or regulations
or directives issued pursuant to this Proclamation; shall, without prejudice to the confiscation of
the property with which the offence is committed, be punishable in accordance with the provisions
of the Criminal Code.

2/ Unless a higher penalty is applicable under the Criminal Code pursuant to sub-article (1) of this
Article:

a) the punishment shall, without prejudice to the confiscation of the property with which the
offence is committed, be rigorous imprisonment not exceeding 15 years and fine not less than Birr
50,000 and not exceeding Birr 100,000 where the accused misused the power of his official
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position or where he committed the offence with intent to improperly amass wealth or where the
offence is committed repeatedly;

b)where the offence is connected with currency, gold, security, goods or any other property, the
fine shall, without prejudice to the confiscation of the property with which the offence is committed
and the punishment of imprisonment, not exceed three times the value of the property unless it is
lower than that imposed under paragraph (a) of this sub-article;

c)where the offence is committed by a body corporate, the fine may, without prejudice to the
confiscation of the property with which the offence is committed, be raised to six times the value
of gold, currency, security, goods or any other property with which the offence is committed unless
it is lower than that imposed under paragraph (a) of this sub-article.

3/ Whosoever commits over or under invoicing of imported or exported goods shall, without
prejudice to the confiscation of the property with which the offence is committed, be punishable
with fine up to three times the value of the property unless it is lower than the fine specified under
sub-article (2)(a) of this Article, and with rigorous imprisonment from 15 to 25 years.

4/ Where any offence under this Article is committed by a body corporate, the director or any other
official who was, at the time of the commission of the offence, responsible for the management of
the body corporate shall be jointly liable and shall be punishable with rigorous imprisonment from
seven to ten years and with fine from Birr 50,000 to Birr 100,000, unless he can prove sufficiently
to of the court that he had no knowledge and could not, by the exercise of reasonable diligence,
have had knowledge of the commission of the offence.

5/Where the offence is committed by an employee or an agent of a body corporate, such employee
or agent shall be punishable in accordance with sub-article (4) of this Article, unless he can prove
sufficiently to the court that he had no knowledge and could not, by the exercise of reasonable
diligence, have had knowledge of the commission of the offence. proclamation no. 591-2008 The
National Bank of Ethiopia Establishment
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 NBE directives

There are more than 30 directives about the insurance business in Ethiopia. some of them are

 Amendment to manner and criteria of transacting Reinsurance

 Statutory Deposit
 Amendment of Opening of Branches
 Insurance Brokers Code of Conduct
 Licensing of Insurance Actuary
 Licensing of Insurance Loss Assessors and Loss Adjustors
 Licensing of Insurance Surveyors
 Amendment of Prohibition of Insurance of a certain Types of Bonds by Insurance
Campanies
 Investment of Insurance Funds

Some example is ;-

LICENSING AND SUPERVISION OF INSURANCE BUSINESS

“Insurance Agent” or “Agent” shall mean a person licensed by the Bank as an insurance agent
who, acting for and on behalf of one or more insurers, engages in:

(a) soliciting or procuring insurance business;

(b) work preparatory to the conclusion of, or in concluding of insurance; and

(c) activities relating to the continuance, renewal or revival of contracts of insurance or in assisting
in the administration and performance of such contracts.

Where the applicant is a juridical person:

 It shall be formed in accordance with the requirements of the provisions of the Commercial
Code of Ethiopia and that of Proclamation No. 86/1994;
 It shall be fully owned by Ethiopian nationals;
 It shall have its head office in Ethiopia;
 The chief executive officer of the agency should at least meet the education, training
and/or experience and other requirements provided for under article 3 sub-article 1
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 (b) & (c) of these directives;
 The owners and the chief executive officer have not been convicted by court of law in
 any country, for an offense involving dishonesty.

Where an application is made to carry on business:

as a general insurance agent or as a long-term insurance agent, the applicant shall deposit
Birr20,000 (Birr twenty thousand) with the Bank, or shall maintain aprofessional indemnity
insurance cover of Birr20,000 (Birr twenty thousand); or as both general and long-term insurance
agent, the applicant shall deposit with the Bank Birr40,000 (Birr forty thousand), or a professional
indemnity insurance cover of Birr20,000 (Birr twenty thousand), in respect of each main line of
insurance agency business he/she is applying for.

TYPES OF INSURANCE PRODUCTS OFFERED BY

INSURANCE COMPANIES

1. Life Insurance:

There is several banks and insurance companies offering life insurance and every company have
dozens of products. Every product is different in its own way in terms of what that product offers,
the benefits, and the way it can protect future. Though there are hundreds of various, but few things
are always common with them. Here protection is for human life or health related. There will be
the payment equal to sum assured (lump sum cash payment) to the beneficiaries. The other
facilities could be payment of policy premium, payment of medical expenses, etc.

Some Important Types of Life Insurance are:

A) Life Insurance Policies: Some popular plans are – term plans, retirement plans, wealth plans,
child education plans. According to IRDA instruction, the policy holder has to pay the premium
for the minimum of 5 years before he can surrender the policy. This restriction is applied while
keeping the interest of policy holder in mind, as the wealth accumulation seems start in real means
after 5 years. The initial years put the policies in the loss, as banks has to deduct the premium
amount towards the various incurred charges such as agents commission, filing charges, service
charges etc.
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B) Health Insurance Policies: Life insurance policies deal with the life of a person, and health
insurance policies deal with the health of a person or a family unit. This to cover the medical bills
and emergency medical (accidents etc.) help. This is one of the main types of insurance which
everyone should have. It is highly recommended in-case you haven’t thought of it till now.

C) Casualty Insurance Policies: It covers a broad spectrum of insurance that includes worker
compensation in case of casualty, crime insurance (injuries during criminal happenings), terrorism
insurance (cover the loss or damage caused by terrorist activities), kidnap and ransom insurance,
and political risk insurance. As said, this covers bigger spectrum, so it not only cover the life or
health losses but also the property losses (like theft and robbery).

Life insurance is such an important thing that the Government of India encourages it by giving lots
of tax saving benefits.

2. General Insurance:

The insurance of property is referred as general insurance. The general insurance is. As there are
several types of insurance to protect properties we own, so banks have several insurance products
for them.

Some Important Types General Insurance are:

A) Auto Insurance: This is vehicle insurance. In India, buying auto insurance is mandatory. The
risk involve while driving or riding a car or a scooter or any vehicle in general is quite high. In
fact, for more than 99% of population, the risk on road or while travelling is the biggest risk which
they have to deal with every day.

There is a little glitch in India that auto insurance is mandatory but life insurance is not. Probably,
this is because a huge percentage of population is living under poverty line and they cannot afford
the premium of life insurance. Good thing happened in current year is that Prime Minister Mr.
Narendra Modi has launched as many as 8 different insurance policies targeting economically
weaker people of India. The premiums are so small that even those living under poverty line can
participate in these insurance policies.

B) Home Insurance / Property Insurance: Insurance of real estate property is covered under these
schemes. There are various different types of insurance policies under home insurance to protect
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against natural calamities. Read the offer document carefully and coverage before spending money
on it

MICRO-INSURANCE

Microinsurance is a type of insurance designed to make essential insurance products more

affordable. It breaks down insurance in its traditional form into something much smaller. It covers
small items such as a one-day trip, a one-time event, or even specific health needs. The concept
lets you pay to insure only what you need. It's meant to help people with lower incomes and those
living in developing countries. Its access to insurance comes in many forms.

Microinsurance offers specified insurance products to those who cannot afford traditional
insurance. It can be sold in any number of ways. These include licensed insurance agents,
community groups, microfinance lenders, and other non-governmental organizations.

Microinsurance has had some success in developing countries as a way for low-income families
to afford insurance. Health is the most popular option. It's also been used with success in other
parts of the world. These include South Africa, India, China, and Brazil.

 Microinsurance Works

Microinsurance can apply to almost any kind of insurance product. Pay-as-you-go (also referred
to as usage-based) auto insurance is a popular form of microinsurance. With this option, you only
pay to insure the miles you really drive. Those who drive fewer miles pay a lower auto insurance
premium.Most things that can be insured with a normal policy can be insured on a small scale or
“micro” level.

Other examples of microinsurance products include:

 Crop insurance
 Disability insurance
 Natural disaster insurance
 Benefits of Microinsurance
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Microinsurance is a way many more people can insure and protect some of their most valuable
assets. It can bring a sense of security to low-income families who could not afford insurance
before.

Other benefits include transparency. There's the ability to handle claims quickly and accurately.
Research shows that when farmers and other small entrepreneurs feel protected by insurance, they
are willing to take more risks and invest more in new business ventures . This is good for the
economy.

There are also signs that microinsurance could grow in popularity beyond just low-income
communities. In an on-demand, millennial-driven economy, products you create for you are
growing more attractive. Companies such as Metromile, a pay-per-mile car insurance company,
fit the tech-savvy profile many young consumers like

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References

negarit gazeta

national bank of Ethiopia

national bank of Ethiopia website insurance-business-directives

(https://nbebank.com/insurance-business-directives/)

National Bank of Ethiopia Risk Management Guideline for insurance Companies in Ethiopia pdf

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