The Insurance Supervision Directorate at the National Bank of Ethiopia (NBE) is set to become an independent insurance regulatory body separate from the central bank. It will evolve into a commission, authority, or agency with a mandate to oversee the insurance industry autonomously.
A committee and a team of experts formed at the central bank a month ago are assessing final recommendations for the decision. The final decision will be made by the board of NBE, chaired by Girma Biru, economic advisor to the Prime Minister.
“A committee has been established and is working on studying the viability of establishing an independent body to regulate the insurance industry. The body will be independent from the NBE,” Fikadu Degife, chief economist and vice governor of NBE, told The Reporter.
The decision will be made by the NBE’s board after the committee finalizes its studies, according to Fikadu.
“The committee cannot make a decision but recommends it to the board. The board is considering the issue, but there has been no decision made so far. It has been a month since the committee was formed and embarked on the work. They have already finalized their assignment,” Fikadu told The Reporter.
The independent institution will not necessarily be a commission, according to Fikadu. The committee took into account other countries’ trends and used a World Bank study as an input, finally presenting their proposals.
The World Bank presented a study on separating insurance regulation from the NBE four years ago.
For almost a decade now, Ethiopian insurance players have been requesting the government to have an independent regulator separate from the NBE. This is mainly because NBE’s focus is more occupied by banks, and the insurance industry remains marginalized due to a lack of proper attention, incentives, support and close nurturing by the central bank.
Though both the banking and insurance sectors existed for over half a century, the banking industry grew by leaps and bounds, while the insurance industry merely survives.
Insurance penetration in Ethiopia also remains nascent, as insurance firms struggle to sell policies by slashing premiums.
But after hearing the progress at the NBE after the committee was established last month, insurers have high expectations that the government is finally close to giving freedom to the insurance industry.
“We heard the government is finally considering establishing an independent regulatory body for the insurance sector. The World Bank has studied the issue and put forward recommendations. It will bring tremendous advantages for the industry’s growth if the decision materializes this time,” Yared Molla, CEO of Nyala insurance and president of the insurance association, said.
Meseret Bezabih, CEO of United Insurance, also shares the same view. Meseret hopes the insurance industry will be led by a separate institution, which will also help the central bank to fully focus on banks instead of regulating various sectors at the same time.
Given the preparations to open up the banking industry, the establishment of a stock exchange, and the upcoming new financial service code underway, separating the insurance industry regulation will ease the burden on the NBE, according to experts.