Insurance companies have been given six months to obtain approval from the National Bank of Ethiopia (NBE) for their senior executive positions or face a penalty of Birr 10,000 per position.
The Licensing and Supervision of Insurance Business Directive which came into force this week requires insurers to secure regulatory approval for individuals holding positions of significant influence within their organizations.
Under the directive, persons with significant influence include shareholders who hold two percent or more shares directly or indirectly, directors, chief executive officers, and senior executive officers.
The directive introduces stringent requirements that must be fulfilled for approval. Among these is the “fit and proper” criterion, which evaluates the knowledge, experience, and age of directors, chief executive officers, and senior executives.
According to the directive, a director must be at least 30 years old, hold a minimum of a first degree, and possess at least five years of relevant experience. It also mandates gender diversity on boards, prohibiting single-gender boards and requiring at least two female directors. Incumbent board members are exempt from this requirement until the end of their current terms.
Insurance companies are also required to appoint at least three independent directors who have no first-degree family ties or business, professional, or commercial relationships with the company. Foreign nationals may qualify as independent directors if they hold a relevant master’s degree and have at least ten years of sector experience, a requirement set for Ethiopian nationals too.
The directive further emphasizes financial soundness for persons with significant influence. It requires verification that such individuals have not been declared bankrupt, have not initiated bankruptcy proceedings, and have not had assets sequestrated. Additional considerations include whether the individual has been declared a judgment debtor in relation to unpaid loans, credit obligations, or taxes, and whether they hold non-performing loans.
It also requires scrutiny of share acquisition, including whether purchases are funded by bankrupt or insolvent parties. Shareholders must demonstrate that their net worth at the time of acquisition exceeds the value of the shares held or to be acquired. The directive also examines whether the individual has had bank accounts closed without reinstatement.
In addition, insurers are required to establish a “fit and proper” policy and maintain a register of persons with significant influence. The directive highlights whistleblowing as a key source of information, requiring companies to ensure that individuals who disclose information in good faith are protected from retaliation.
It further limits the duration of acting appointments. Individuals may not serve in acting capacities as chief executive officers or senior executive officers for more than six months, beyond which such experience will not be recognized as relevant managerial experience. However, the acting period for a chief executive officer position may extend up to nine months. All acting appointments to vacant positions must be reported to the NBE within three working days.
The NBE requires a formal written request to conduct fitness and propriety assessments. Required documents include an updated and signed curriculum vitae, organizational structure, board appointment minutes, identification documents, and an Ethiopian Police clearance certificate for directors, chief executive officers, and senior executives. All persons with significant influence must also submit a completed fitness and propriety questionnaire and a tax identification number card.
The directive further requires that all currently serving senior executives who comply with the provisions of the directive and have not yet received NBE approval must do so within six months.
Applications filed past the set deadline will result in a penalty of Birr 10,000 for each unapproved position.
