Insurance companies in Egypt plan to lodge objections to high capital requirements in the proposed new insurance law, following an industry meeting held last week 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, the 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 proposing that the minimum capital be set at EGP120m instead, so as to encourage investment in the sector. Furthermore, EGP60m to EGP180m.
Another suggestion made by the IFE is for oil and aviation insurance activities to be treated separately. That is, if a P & C insurer wishes to carry out insurance only or aviation insurance only, the additional minimum capital required in each instance should be EGP75m instead. In the case where 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 companies are involved in the business of petrol, Misr Insurance already dominates 95% of the business.
The association also sees to the minimum requirement for reinsurers to increase their minimum capital by 733% to EGP500 m.
In motor insurance, the IFE is demanding that an actuarial study should be made with the proposed doubling of the amount of compensation at EGP80,000 from EGP40,000 at present. The IFE stressed that failure to increase rates proportionately to compensation would result in heavy losses for insurers.
The IFE plans to raise several issues with the FRA on issues such as takaful, license fees, and technical allocations.