Ethiopia Indicates Insurance Industry’s Probable Opening for Foreign Firms

Addis Abeba — Following years of speculation, the National Bank of Ethiopia (NBE) announced their intention of allowing foreign insurers to operate in the country after the creation of an independent body to regulate the sector is materialized, according to Solomon Desta, Deputy Governor of the NBE, who made the announcement during the two-day annual East African Finance Summit held in Addis Ababa starting on 15 June 15, 2023.

Efforts to form an independent organization began five years ago, after the World Bank released a study outlining the benefits of separating insurance regulation from the NBE. In partnership with the World Bank, a committee was formed last year and is currently studying the feasibility of establishing an independent entity to regulate the insurance industry.

“As soon as the studies are completed and an independent body is established, the government will go on to the next step, which is working on opening the insurance industry for foreign firms,” said Solomon.

In light of the reforms that are already being implemented and the fierce competition that lies ahead of them, the deputy governor urged insurance firms to be prepared for consolidation, an upgrade in technology and capital, and a review of their strategies.

In early May, the central bank offered to issue five banking licenses to foreign investors in the next five years, as part of the plan to open up the financial services sector to foreign competition.

Industry players emphasize that the development of the insurance industry has been constrained by the lack of support, incentives and proper oversight. Chaired by Mulualem Berhane (PhD), the Board of Directors of United Insurance reflected similar sentiment during shareholders’ assembly held a couple months ago. “The insurance industry is not given as much emphasis by the government as those of the banking sector,” reads the statement issued during the assembly, adding that “the insurance industry is literally overlooked by the government”.