Ethiopia’s Insurance Regulatory Reform: What Insurers, Brokers, Investors and Directors Should Prepare for

Executive Proposition

Ethiopia’s insurance reform is already legally consequential, but it is not yet a single enacted code. Four National Bank of Ethiopia directives effective from 26 March 2026 have reset important rules for brokers, persons with significant influence, external auditors and microinsurance agents. Separately, the National Bank has published and consulted on a draft Insurance Proclamation that would establish an autonomous insurance regulator, open defined routes for foreign participation, deepen prudential and conduct supervision, enable regulatory sandboxing and permit a policyholder-protection fund. The practical task is therefore two-speed: comply now with the directives and existing proclamations, while preparing, without treating it as law, for a draft architecture that may still change.

1. The Reform Is Two-Speed: Operative Law and Proposed Law

Ethiopia’s present insurance regime remains anchored in the Insurance Business Proclamation No. 746/2012, as amended by Proclamation No. 1163/2019, together with NBE directives and the insurance-contract rules contained in Book III of the 1960 Commercial Code, which remain applicable pending the issuance of a Financial Services Code. Proclamation No. 746/2012 subjects insurance business to NBE licensing, places market-conduct matters within the NBE’s directive-making power and requires prior scrutiny of specified owners and managers. The 2019 amendment admitted participation by foreign nationals of Ethiopian origin and their qualifying enterprises, recognised digitally accessed or delivered financial services, and otherwise maintained the general exclusion of foreign insurers and foreign investors. The 2026 package does not have one legal status. Directives SIB/62/2026, SIB/63/2026, SIB/64/2026 and SMIB/4/2026 took effect on 26 March 2026. By contrast, the text published by the NBE in April 2026 and discussed with stakeholders in May 2026 remains, as at the date of this article, a draft. The official NBE materials reviewed continue to call it the “Draft Insurance Proclamation”; enactment has not been independently confirmed. Its provisions should therefore inform readiness and transaction planning, but should not be pleaded, contracted upon or presented to customers as operative law. Status rule: Current compliance decisions should be tested against the 2012 and 2019 Proclamations and directives presently in force. The draft should be maintained in a separate change register, with assumptions, dependencies and implementation triggers clearly identified.

2. A Proposed Institutional Reset

The draft would transfer insurance supervision from the NBE to an autonomous Ethiopian Insurance Regulatory Authority accountable to the Ministry of Finance but stated to enjoy operational independence and legal personality (draft Arts. 3–6). Its objectives would extend beyond solvency supervision to policyholder and intermediary-customer protection, market fairness, competition, inclusion and financial stability. Its proposed powers include licensing and revocation, risk-sensitive and group-wide supervision, corporate-governance standards, macroprudential measures, market-conduct oversight, resolution functions, anti-money-laundering supervision, public education and regulatory sandboxing. This is more than a change of institutional name. The draft envisages a specialist regulator whose funding sources would include annual insurer levies, licence and service fees, an initial government allocation and, where necessary, government funding of a budget shortfall. It would also confer broader conduct powers and a mandate to supervise insurance groups and innovation. The draft preserves continuity: existing NBE insurance directives would remain effective to the extent consistent with the new Proclamation until amended or repealed, while regulatory rights and obligations would transfer to the new Authority (draft Arts. 184–186). Insurers should consequently map every NBE approval, filing, enforcement matter and supervisory undertaking that may need an orderly handover.

3. Licensing, Ownership and Foreign Entry

Under current law, an insurer must be licensed by the NBE and organised as a qualifying share company. The 2019 amendment permits a foreign national of Ethiopian origin, or a qualifying enterprise owned by such persons, to acquire shares or establish an insurer subject to foreign-currency funding and other conditions; returns and transfer proceeds are payable in Birr and are not repatriable under that amendment. Other foreign nationals, foreign-owned entities and foreign insurers remain generally prohibited from establishing, carrying on or acquiring an interest in an Ethiopian insurer. Transactions premised on broader market access must therefore remain conditional unless and until the law changes. The draft proposes three principal licence categories: general insurance, long-term insurance and reinsurance. It also provides that an insurance business licence may be issued as an inclusive-insurance-only licence or a Takaful-insurance-only licence. The draft would generally prohibit a composite general-and-long-term licence, subject to a limited directive-based route for inclusive products (draft Arts. 35–36). A licence would not itself authorise immediate operation: an insurer would also need commencement approval after demonstrating operational systems, reinsurance arrangements, risk controls, personnel, capital and solvency readiness, and would ordinarily have twelve months to commence (draft Art. 41). This two-stage approach would make operational readiness a formal licensing condition rather than a post-licence aspiration. Foreign participation would be liberalised through more than one route. A foreign insurer could apply to establish a partially or fully owned Ethiopian subsidiary, acquire shares or establish a representative office. Article 44 also proposes individual and aggregate foreign-shareholding limits: 40 per cent for a strategic foreign investor, 7 per cent for a non-strategic foreign natural person, 10 per cent for a non-strategic foreign juridical person and 49 per cent for aggregate foreign participation in subscribed shares. However, the relationship between the permission for a foreign insurer to establish a partially or fully owned subsidiary and those shareholding limits is not fully clear on the face of the draft and will require clarification in the enacted text or implementing directives. Capital, governance, localisation, fit-and-proper and subsidiary-number conditions would be left substantially to future directives.

4. Significant Influence: A Continuing Supervisory Relationship

Directive SIB/63/2026 is operative now. It treats influential shareholders, directors, chief executive officers and senior executives as persons with significant influence. For the Directive, an “influential shareholder” begins at 2 per cent of subscribed capital. That threshold is a supervisory classification; it does not displace the separate ownership limits in the governing Proclamation. Approval and suitability are not one-time entry tests: the NBE may reassess fitness and propriety, and insurers must maintain internal policies, current records and escalation processes capable of identifying later changes in integrity, competence or financial soundness. The draft uses a different concept and threshold. A “significant owner” would include a person holding at least 4 per cent of subscribed capital or voting power, as well as a person able to appoint or remove directors or otherwise exercise dominant influence. Prior approval would be required to become or cease being a significant owner or to cross prescribed control thresholds; an insurer would be prohibited from facilitating a non-compliant acquisition. If an owner became unsuitable or acquired influence without approval, the proposed Authority could restrict voting, dividends and board influence or require disposal (draft Arts. 51–53). The current 2 per cent Directive threshold and the draft 4 per cent ownership/control threshold should therefore be tracked separately. For investors, beneficial ownership and funding provenance now require regulatory-grade evidence. For insurers, the share register is no longer enough: indirect holdings, concert-party relationships, board nomination rights, financing arrangements and events affecting an owner’s net worth or integrity should feed into an ongoing suitability file. Share purchase agreements and shareholder agreements should allocate responsibility for approvals, information undertakings, regulatory conditions precedent, voting standstill and compelled divestment.

5. Directors, Senior Officers and Control Functions

SIB/63/2026 materially raises the present governance baseline. Directors require specified education and relevant experience; the board must collectively cover disciplines including insurance, risk, finance, accounting, law, technology, investment and sustainability. The Directive requires at least two women and three independent directors, and permits independent directors to be non-Ethiopian if the prescribed qualifications are met. It also imposes detailed experience requirements for the chief executive officer and regulated senior-executive positions and subjects persons with significant influence to integrity and financial-soundness assessment, including relevant credit and tax-payment default history. Specific source-of-funds disclosure applies to new shareholders and existing shareholders seeking to increase their holdings. The board’s obligation is institutional, not merely documentary. Each insurer must adopt a fit-and-proper policy; keep evidence for current and former influential persons; provide for continuing assessment and disclosure; notify material changes; and maintain a whistleblowing framework with protection against retaliation. The NBE may suspend voting rights or suspend or remove an unsuitable person. Previously unapproved senior executives within the Directive’s scope were given six months from effectiveness to obtain approval. The exemption for certain incumbent directors applies only to the first-degree requirement in Article 5.1.1(I) and lasts only until the expiry of the director’s current term. The draft would deepen this model by requiring prior approval for directors, the chief executive, senior executives and key persons in control functions, and by expressly requiring risk-management, compliance, actuarial and internal-audit functions with adequate authority, independence and resources (draft Arts. 58–60). Directors should expect accountability to attach to the design and effectiveness of these systems, not only to receipt of management reports. Board calendars should evidence challenge of solvency, reserving, reinsurance, conduct, claims, outsourcing, cybersecurity and related-party risk.

6. External Audit: Independence, Rotation and Board Ownership

Directive SIB/64/2026 applies to insurers and an Ethiopian reinsurer. Shareholders appoint the external auditor through a competitive process, but an insurance company owned by the Federal Government may be audited by the Office of the Auditor General or an auditor appointed by that Office without necessarily undergoing competitive bidding. The insurer must seek NBE approval within twenty working days of an auditor’s appointment or reappointment and submit the supporting corporate records. The rotation clauses require careful reading: the Directive defines one term as three consecutive years, states that an auditor appointed through competitive bid shall not hold office for more than one term, and also states that the maximum in any insurer is two consecutive terms, followed by a three-year cooling-off. Because of these formulations, an insurer should obtain prior NBE confirmation before relying on a second term. Audit firms must hold a current Accounting and Auditing Board of Ethiopia licence and demonstrate IFRS and fair-value capability; audit-team members must provide appointment-specific independence and fit-and-proper confirmations. Independence is reinforced by restrictions on recent employment and non-arm’s-length financial relationships. The board must secure unrestricted auditor access, review the engagement letter before offering the audit work, hold pre-audit and exit meetings with the full board, consider interaction with internal audit and evaluate the external-audit process at the end of each audit cycle or year. The audit report and management letter are due to the NBE within three months after financial year-end. The approved audit report and specified risk, solvency, capital and fair-value disclosures must be published on the insurer’s website within two weeks from approval of the external audit report. Auditor tenure, tender timing, independence declarations, permitted services and reporting deadlines should now sit on the board’s compliance calendar.

7. Brokers and Microinsurance Agents

Directive SIB/62/2026 modernises broker licensing while preserving a domestically constituted channel. A broker may operate as a sole proprietor or limited liability partnership, subject to Ethiopian nationality and ownership requirements stated in the Directive. Responsible persons must meet insurance-education and managerial-experience tests. Existing brokers organised in other business forms have five years to reorganise as limited liability partnerships. The licence is renewed annually, and uninterrupted professional-indemnity insurance is central to continued authorisation; the minimum cover is the greater of three times the annual general commission earned by the broker in the preceding accounting period and ETB 1 million. The broker’s duties are framed in client-protection terms. The broker must exercise professional skill, place the client’s interest first, act in good faith, explain material terms and ordinarily test the risk with at least three insurers unless the client makes a written selection. Money received as premiums or claims payments is subject to the broker’s fiduciary responsibilities. A broker may be liable where the client supplied full information but the broker failed to transmit a material fact and the insurer repudiated the claim. Placement files should therefore show market comparison, recommendation rationale, client consent, disclosures, remittance and claims assistance. Directive SMIB/4/2026 creates a more structured distribution regime for microinsurance agents. Individuals and eligible corporate bodies require annual licences, prescribed training, integrity screening and professional-indemnity cover. Agency agreements must allocate product categories, functions, premium remittance, claims authority, remuneration, liability and termination. A corporate agent collecting premiums must use a separate account and remit within the Directive’s timetable; receipt by an authorised agent is treated as receipt by the provider. The provider remains liable to the customer for acts, omissions and misrepresentations within the agent’s actual or implied authority. Inclusion is thus being expanded through controlled delegation, not through regulatory dilution.

8. Insurtech and Digital-Policy Distribution

Digital distribution is already legally relevant. Proclamation No. 1163/2019 recognises insurance accessed or delivered through digital channels as a digital financial service. The Financial Consumer Protection Directive No. FCP/01/2020 permits a written contract or a clearly specified and verifiable electronic contract acceptable to the consumer, provided the consumer can review the terms in advance and receives the final contract. Electronic records, signatures and related evidentiary questions also engage the Electronic Transaction Proclamation No. 1205/2020. Technology does not displace the regulated activity. A platform that solicits, advises, places, underwrites, collects premiums or performs claims functions must be analysed by function against insurer, broker, agent, outsourcing and payment rules. The draft’s proposed sandbox (draft Art. 166) would allow controlled testing under criteria to be issued by the proposed Authority; it would not be a general exemption or a substitute for the underlying licence. Product teams should build a regulatory-perimeter memorandum before launch, and contracts should address customer ownership, disclosures, consent, data security, complaint routing, premium segregation, audit access, business continuity and exit.

9. Policyholder Protection and Claims Handling

Policyholder protection is not waiting for the draft. FCP/01/2020 applies to insurers and requires fair and honest treatment, accurate and balanced advertising, plain and legible information, a key-facts statement and clear policy terms covering premiums, exclusions, the period of cover and the claims process. It recognises multiple complaint channels and requires the provider to notify the complainant of the outcome within a maximum of ten business days. A consumer may escalate an unresolved complaint to the NBE; the Directive also requires board-level complaint reporting and root-cause analysis. The draft would consolidate these ideas into a statutory market-conduct standard extending from the pre-contract stage until all obligations are performed. It would require integrity, skill, care, diligence, transparency, fair treatment, conflict management, clear and non-misleading information and protection of customer data; regulatory duties could not be contracted away (draft Art. 164). It would also authorise rules for complaint and dispute resolution, and permit a Policyholder Protection Fund to be established by Council of Ministers regulation (draft Arts. 165 and 176). The fund is therefore a proposed enabling mechanism, not an existing guarantee. Claims governance should be treated as a conduct-risk system. Files should disclose the contractual and evidential basis of decisions, record communications and handoffs, distinguish fraud indicators from unsupported suspicion, control conflicts involving intermediaries or loss assessors, and enable management to identify recurring delay, repudiation and settlement patterns. In the draft’s proposed framework, weak claims practices could engage both entity-level sanctions and the accountability of directors, senior executives and key control-function holders.

10. A Practical Preparation Agenda

1. Separate law from proposal. Maintain an effective-date register distinguishing current proclamations and directives from draft provisions, future regulations and anticipated directives.
2. Re-paper significant influence. Reconcile the legal and beneficial ownership map, director and executive files, source-of-funds evidence, ongoing declarations, notification triggers and shareholder-agreement protections.
3. Test the board operating model. Measure current composition, independence, diversity, collective skills, control-function reporting, whistleblowing, committee mandates and minutes against SIB/63/2026 and the draft’s direction of travel.
4. Reset the audit calendar. Confirm tenure, tender and cooling-off dates; NBE approval deadlines; team independence; prohibited relationships; board meetings; management-letter ownership; and publication dates.
5. Audit distribution. Verify broker and microinsurance-agent licences, organisational form, professional-indemnity insurance, training, agency terms, premium handling, comparison records and provider oversight.
6. Review the digital journey end to end. Test licensing perimeter, advertising, key facts, electronic consent, policy delivery, payment reconciliation, cybersecurity, complaint routing, claims communications and outsourced-service controls.
7. Treat claims data as board information. Track turnaround, ageing, repudiation grounds, litigation, complaints, intermediary failures and vulnerable-customer outcomes, with documented remediation of recurring causes.
8. Structure investment conditionally. Foreign investors and local counterparties should model both current-law and draft scenarios and use robust conditions precedent; the draft’s percentages, institutional design and delegated rulemaking may change before enactment.

Conclusion

The reform’s central movement is from periodic licensing toward continuous demonstrable suitability: of owners, directors, managers, auditors, intermediaries, products and customer outcomes. That movement is already visible in the four directives effective since March 2026. The draft Proclamation would carry it further through a specialist regulator, calibrated foreign entry, more explicit control functions, statutory conduct rules, innovation supervision and resolution tools. The prudent response is neither to await enactment nor to behave as though it has occurred. It is to close present compliance gaps, design systems capable of evidencing judgment and accountability, and prepare modular implementation plans that can be updated when the final legislative text and consequential directives are known. DABLO Law Firm regularly advises domestic and international clients on financial-sector regulation, investment, corporate governance, licensing, market entry and regulatory compliance. The Firm is available to assist insurers, insurance brokers, investors, directors and other market participants in assessing the implications of the 2026 insurance directives and preparing for the reforms contemplated under the draft Insurance Proclamation.

Selected Legal and Regulatory Instruments

• Insurance Business Proclamation No. 746/2012
• Insurance Business (Amendment) Proclamation No. 1163/2019
• Commercial Code of 1960 (Book III: Insurance)
• Electronic Transaction Proclamation No. 1205/2020
• Financial Consumer Protection Directive No. FCP/01/2020
• Insurance Corporate Governance Directive No. SIB/48/2019
• Licensing of Insurance Broker Directive No. SIB/62/2026
• Requirements for Persons with Significant Influence Directive No. SIB/63/2026
• External Auditor of an Insurance Company Directive No. SIB/64/2026
• Licensing and Supervision of Microinsurance Agents Directive No. SMIB/4/2026
• Draft Insurance Proclamation published by the NBE in April 2026

Disclaimer: This legal insight is for general information only as of 03 August 2026 and does not constitute legal advice. Regulatory texts, including the draft Insurance Proclamation, may be amended, supplemented or differently applied. Advice should be obtained on the facts of a specific transaction or compliance question.