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The House of Peoples’ Representatives on Thursday debated a new Insurance Business Proclamation which on approval will replace the 1994 law, introduce a cap of 5 percent ownership on investors in insurance companies and empower the National Bank of Ethiopia with swift powers to govern the industry.
Crafted by the regulator National Bank of Ethiopia (NBE) which says a reform assisted by a foreign consultant led to the making of the new bill, the draft was taken in and sent by the House to Budget and Finance Affairs Standing committee.
As per the House codes, the committee  in the coming three weeks time will hold public hearings and experts’ meeting before returning it to the floor for expected final approval. Not once the federal parliament has turned down a bill sent from the Council of Ministries.
While the industry actors and the regulator NBE together appreciate the need to write-off 1994’s law which governed the insurance industry for 17 years to better govern the industry set to be performing worse in recent years with unfair competition- sometime between branches of a single firm-, some of the Insurance Business bill stipulations however remain contentious and are likely to surface the upcoming public hearings.
Among articles the private sector voiced concerns against one is the stipulation that the maximum share an investor can hold in any insurance firm is five percent. Also stipulated is a ban on businesspersons from investing in multiple firms if they have more than a 2 percent share in one firm.
As NBE professed in a letter sent to the House, the private sector demanded NBE to at least upgrade the five percent cap to 10 while the definition of “influential shareholder” in a firm should be on those with 5 percent share not with 2 percent as the bill reads.
“An influential shareholder of any insurer may not acquire shares in another insurer,” stipulates article 12 of the bill.
NBE insists the stipulation is in the best interest of the industry while it points out the banking sector is governed by similar stipulations.
Worrisome for the investors however is that since now the investors have up to a 20 percent share in insurance companies, when the bill becomes effective they would be forced to sell their shares at a possible loss since most insurance firms are not brining significant profits pushing investors away from the sectors.
Also included in the bill are swift powers for NBE. From assigning and calling a general meeting of shareholders to restricting voting by proxy in any meeting of shareholders, NBE would be enjoying  significant powers in insurers’ assets that it said up to 80 percent is the public’s and if necessary should directed by the regulator.
“While one invested his saving, money in millions, here we are saying you cannot have say on your money and you should sit back and watch the regulator- one government employee to be precise- do whatever with,” said opposition MP Girma Seifu against the stipulation.
While the NBE seeks to empower its employees to direct investors’ money and resources insurers’ mobilizes, it seeks to preempt charges against them. “Any employee or agent of the National Bank may not be subject to any personal liability for their bona fide done for the purpose of carrying out this proclamation into effect,” reads the bill’s article 52.
The bill also says unless one is a federal or regional government, they will not have insurance cover from a policy issued on partial or full credit.