LICENSING AND SUPERVISION

OF INSURANCE BUSINESS

Requirements for Persons

with Significant Influence in an Insurer
Directives No. 105/2020

Whereas, ensuring sound practices, stability and long-term institutional success in financial
system in general and the insurance sector in particular is crucial;

Whereas, public confidence in the financial system depends, among other things, on
whether financial institutions including insurers are owned and managed by persons who
are fit and proper;

Whereas, it is necessary to enhance effectiveness of governance of insurers;

Whereas, there is a need to ensure that the National Bank of Ethiopia exercises its
responsibilities to assess whether insurers are soundly and prudently managed and directed;

Now, therefore, in accordance with articles 4(1g&h), 15(4a) and 58(2) of Insurance
Business Proclamation No. 746/2012, the National Bank of Ethiopia hereby issues these
directives.

1. Short Title

These Directives may be cited as “Requirements for Persons with Significant Influence
in an Insurer Directives No. 105/2020".

2. Definitions

For the purpose of these directives, unless the context provides otherwise:
2.1 “Bankrupt” means a person who has been declared bankrupt by the court of law;
2.2 “Chief executive officer” means a person by whatever title that person may be
referred to, who is primarily responsible for the day-to-day management of the
affairs of an insurer;
2.3 “Composite insurer” means an insurer that is licensed to run both life and general
insurance;
2.4 “Core area” means an insurance operation, life and/or general, related to
underwriting, claims, reinsurance, finance, internal control or audit and risk
management;
2.5 “Director” means any member of the board of directors of an insurer by whatever
title he may be referred to;

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 2.6 “Financial institution” means insurance company, bank, microfinance institution,
postal savings, money transfer institution or such other similar institution as
determined by the National Bank;
2.7 “Fit and proper criteria” are criteria used to assess and determine whether persons
with significant influence possess the integrity, financial soundness and
competence and capacity to fulfill the responsibilities of their positions;
2.8 “Influential shareholder” means a person who holds directly or indirectly two
percent or more of the total subscribed capital of an insurer;
2.9 “Managerial position” means a position whose holder reports directly to a senior
executive officer or higher;
2.10 “National Bank” means the National Bank of Ethiopia;
2.11 “Person” means any natural or juridical person;
2.12 “Persons with significant influence” are influential shareholders, directors, chief
executive officer and senior executive officers of an insurer;
2.13 “Senior executive officer” means any officer of an insurer, by whatever title
he/she may be referred to, who is deputy to the chief executive officer or is
directly reporting to the board of directors;
2.14 “Technically insolvent person” means a person whose liabilities are greater than
assets or whose significant part of assets have been foreclosed by a financial
institution or sequestrated by court order;

3. Scope of Application

The provisions of these directives shall be applicable to persons with significant

influence in an insurer.

4. General

4.1 Persons with significant influence shall meet all respective requirements and
considerations set in these directives.
4.2 Appointment of directors, chief executive officer and senior executive officers shall
be subject to approval by the National Bank.
4.3 In appointing a chief executive officer and senior executive officers, the board of
directors shall ensure that such persons fulfill the requirements set in these
directives.
4.4 Any shareholding that makes a person influential shareholder shall be approved by
the National Bank.

5. Fit and Proper Criteria

5.1 Knowledge, Experience and Age

With respect to knowledge, experience and age of directors, a chief executive
officer and senior executive officers shall fulfill at a minimum the following:
5.1.1 Board of Directors
i) At least seventy five percent an insurer’s board members shall hold a
minimum of first degree or equivalent from recognized higher learning
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 institution; and the remaining board members, at a minimum, shall
complete general secondary school or its equivalent.
ii) Members of the board of directors shall have adequate experience in
business management, preferably in insurance business, and/or should
take adequate training in insurance business management after holding a
seat on the board.
iii) A director shall be at least 30 years old.

5.1.2 Chief Executive Officer

A chief executive officer shall:
i) hold a minimum of first degree from recognized higher learning
institution and preferably have diploma or advanced diploma in
insurance from the Chartered Insurance Institute (CII) or Life
Office Management Association (LOMA);
ii) have a minimum of 10 years experience in insurance, of which,
at least 5 years shall be in a senior managerial position, where by
in case of,
a) composite insurer, must be in any one or more of the
core areas of general insurance business and
preferably additional experience in life insurance
operations;
b) general insurer, must be in any one or more of the
core areas of the general insurance operations; and
c) life insurer, must be in any one or more of the core
areas of life insurance operations.

5.1.3 Senior Executive Officers

A senior executive officer shall:
i) hold a minimum of first degree from recognized higher learning
institution and preferably have diploma or advanced diploma in
insurance from the Chartered Insurance Institute (CII) or Life
Office Management Association (LOMA);
ii) have a minimum of 8 years experience in insurance, of which, at
a minimum 4 years shall be in a managerial position, whereby in
case of:
a) general insurance business, must be in any one or
more of the core areas of general insurance
operations; and
b) life insurance business, must be in any one or more of
the core areas of life operations.

5.2 Integrity
Persons with significant influence shall be honest, reputable and diligent. In
determining integrity of persons with significant influence, all relevant factors shall
be considered, including but not limited to:

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 5.2.1 Whether the person has a record or evidence of previous conduct and activities
where he/she/it has been convicted for a criminal offense under any law
promulgated to protect members of the public from dishonesty or fraud
whether in Ethiopia or elsewhere;

5.2.2 Whether the person has a record of withholding information from public
authorities, submission of incorrect financial or other statements, prior refusal
of regulatory/supervisory approval and failure to comply with requirements of
regulatory/supervisory body, other corrective actions or interventions by
public authority; and

5.2.3 In case of chief executive officer and senior executive officers, whether the
person has a record of disciplinary measures or any dispute with previous
employers or compliance with a code of conduct which has led to the
imposition of a penalty under employment law and any other disciplinary
measures imposed by trade or professional associations;

5.3 Financial Soundness

Persons with significant influence shall be financially sound. In determining
financial soundness of persons with significant influence, all relevant factors shall
be considered, including but not limited to:
5.3.1 Whether he/she or the legal person in which he/she is a director or chief
executive officer or senior executive officer or owner has instituted
bankruptcy proceedings or declared bankrupt, whether in Ethiopia or
elsewhere, or his/her or the company’s assets have been sequestrated because
of bankruptcy or been foreclosed by a bank because of failure to repay a loan;

5.3.2 Whether he/she or the legal person in which he/she is a director or chief
executive officer or senior executive officer or owner has been convicted of
default on repayments of bank or other credits or tax payment;

5.3.3 Whether he/she or the legal person in which he/she is a director or chief
executive officer or senior executive officer or owner carries non-performing
loans, as defined by directives of the National Bank, from any financial
institution;

5.3.4 Whether the person’s purchase of shares in a financial institution has been
funded or to be funded by another person who is actually bankrupted or
technically insolvent because of irresponsible or reckless management, fraud
or illegal business practice;

5.3.5 Whether the person’s minimum net worth at the time of acquisition of shares
is at least greater than shares acquired or to be acquired from a financial
institution; and

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 5.3.6 Whether a person’s account has been closed and not reinstated by any bank, in
line with relevant directives of the National Bank, because of drawing checks
without sufficient funds.

6. Ongoing Fitness and Propriety Test, and Action by the National Bank

The National Bank may conduct fitness and propriety test on persons with significant
influence of an insurer on an ongoing basis. Where such a test indicates that a person
with significant influence has failed to fulfill the fitness and propriety test as set out in
these directives, the National Bank may:
6.1 suspend voting rights of influential shareholder;
6.2 suspend and/or remove a director, chief executive officer or senior executive officer
of an insurer.

7. Subsequent Notification Requirements

7.1 Persons with significant influence are required to immediately notify the National
Bank any events that might change their assessment as fit and proper;

7.2 If board of directors, chief executive officer, senior executive officers or external
auditors of an insurer, during the course of performing their duties, has reasonable
doubt that a person with significant influence has failed to fulfill the criteria in these
directives, they shall immediately report the matter to the National Bank.

8. Documents to be submitted on Application

8.1 Written request shall be submitted to the National Bank along with the following
documents in order to conduct fitness and propriety test:
8.1.1 For directors, chief executive officer and senior executive officers:
i) an updated and signed curriculum vitae (including name, nationality,
birth date, martial status, education, recent photograph, employment
history, experience in business and financial affairs, involvement in
civic, social and charitable activities including any leadership position
held) accompanied with original and copies of documents signifying
educational qualification and work experience;
ii) copies of identification card and /or passport;
8.1.2 For all persons with significant influence:
i) completed and signed fitness and propriety test questionnaire which
is part hereof;
ii) copy of tax identification number card; and
iii) any other document that the National Bank deems necessary;

8.2 In case of a director representing an corporate body which is an influential

shareholder, the following documents shall be submitted:

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 8.2.1 Copy of the company’s memorandum and articles of association;
8.2.2 Copies of audited statements of the legal entity concerned, for three
consecutive years (immediately preceding its application) or for each year it
has been in operation, if less than three years; and
8.2.3 Any other documents the National Bank deems necessary.

9. Period of limitation of Acting Officers

A person shall not assume chief executive officer or senior executive officer position on
acting basis for more than six months.

10 Exemptions

10.1 Provisions of article 5.1.1 of these directives shall not apply to the incumbent
board members until their present office term expires; and

10.2 Provisions of article 5.1.2 and 5.1.3 of these directives shall not apply to the
incumbents as long as they hold the position with their present employers.

11 Repeal

Articles 4 and 5 of Licensing and Supervision of Insurance Business Directive No

SBB/1/1994 are hereby repealed and replaced by these directives.

12 Effective Date

These directives shall enter into force as of 17th day of September 2012.

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 CONFIDENTIAL

NATIONAL BANK OF ETHIOPIA

ANNEX 1: GENERAL INFORMATION (Influential shareholder, director, chief executive officer or senior
executive officer - Underline)

NB: In case the space provided is inadequate, use additional paper.

1. Name of insurer: _______________________________________

2. Personal Information
a) Full Name: _____________________________________
b) Date of Birth: ___________________________________
c) Place of Birth: __________________________________
d) Nationality: _____________________________________
e) Identification Card Number and Date of Issue: _______________________________________
f) Passport Number and Date of Issue: _______________________________________________
g) Tax Payer Identification Number: _________________________________________________
h) Address: City:____________ Sub-City:____________ Kebele: __________ House No:
_________ Postal Address: ___________ Telephone No: _____________

h) Educational Qualification:

_____________________________________________________________________________
__________________________________________________________________
i) Summary of Work Experience:
No. Organization Position Duration Number of years

j) Name(s) of your bankers for the last 5 years

_______________________________________________________________________________
_______________________________________________________________________

3. Please list financial institutions in which you currently (as of completing this form) own shares in the
following table.

Name of Subscribed Shares owned

the
financial
institution number Amount Remarks

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4. Description of your past and current business activities in Ethiopia and abroad (if applicable)
a) Current shareholding or ownership in non-financial companies

Company Date of Amount of % of shareholding (in total

name incorporation shareholding shares of the company) Remark

b) Past shareholding or ownership in a company (shares you owned in the past but had been
relinquished)
% of shareholding Reason for
Company Date of Amount of (in total shares of termination of
name incorporation shareholding the company) shareholding Remark

c) Borrowings (directly or indirectly)

Status of the loan (pass, s.
lending

Security offered (type)

mention, doubtful …)
Type of loan/ facility

Current outstanding
Name of borrower*

Amount borrowed

Date of Approval

Value of security
of
institution

Remark
Balance
Name

*Including all companies 10% or more owned by the applicant, the applicant’s spouse and children less than
18 years.

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 5. If legal person (for influential shareholders), please complete the following table for the recent three
financial years (Please also attach audited financial statements)

Year Assets liabilities Net worth Remarks

6. If you are new shareholder to the insurer or existing shareholder planning to increase your
shareholding above what you currently own, please provide details of the actual source(s) of funds that
you, as a shareholder, would like to invest or use in the acquisition of shares in a an insurer.
……………………………………….............................................….......................………………………
………………………………………………………………………………………………………….........
...............................................................................................................................................

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 ANNEX 2: PROPRIETY TEST QUESTIONNAIRE

Please give yes or no answers for the following questions and if your answer is "yes" please give particulars.

Full Name: _____________________________________________________________

(Influential shareholder, director, chief executive officer or senior executive officer - Underline)
Name of insurer: ______________________________________________________
Yes No

1. Have you or the legal person in which you were a director, chief executive officer or senior
executive officer or owner been charged or convicted of any criminal offence, particularly
an offence relating to dishonesty or fraud, under any law whether in Ethiopia or elsewhere?
If yes, give particulars__________________________________________________
____________________________________________________________________
2. Have you or the legal person in which you were a director, chief executive officer or senior
executive officer or owner ever been imposed with corrective actions or interventions by
public authority due to withholding information or submission of incorrect financial or
other statements?
If yes, give particulars__________________________________________________
____________________________________________________________________

3. Have you or the legal person in which you were a director, chief executive officer or senior
executive officer or owner been refused approval by any regulatory/supervisory
body or failed to comply with requirements of regulatory/supervisory body?
If yes, give particulars__________________________________________________
____________________________________________________________________
4. Have you ever been in dispute with previous employers or a record of any disciplinary measure
Or failure to comply with a code of conduct which has led to the imposition of a penalty under
employment law or ever been dismissed or requested to resign from any office of employment
or disciplinary measures imposed by trade or professional associations?
If yes, give particulars__________________________________________________
____________________________________________________________________
5. Have you been refused, whether in Ethiopia or else where, the right to carry on any trade,
business or profession for which a specific license, registration or other authority is required;
If yes, give particulars__________________________________________________
____________________________________________________________________

6. Have you or the legal person in which you were a director, chief executive officer or senior
executive officer or owner been declared bankrupt whether in Ethiopia or elsewhere
or have its assets been sequestrated because of bankruptcy or foreclosed by a bank/MFI due
to failure to repay a loan?
If yes, give particulars__________________________________________________
____________________________________________________________________
7. Have you or the legal person in which you were a director, chief executive officer or senior
executive officer or owner been convicted of default on repayments of bank or other
credits or tax payment ?

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 If yes, give particulars__________________________________________________
___________________________________________________________________

8. Have you or the legal person in which you were a director or chief executive officer or senior
executive officer or owner been carrying non-performing loans or account been closed and
not reinstated by any bank in line with relevant directive of the National Bank?
If yes, give particulars__________________________________________________
____________________________________________________________________
9. Has your purchase of shares in a financial institution been funded or to be funded by another
person or legal entity who is actually bankrupted or technically insolvent because
of irresponsible or reckless management, fraud or illegal business practice?
If yes, give particulars__________________________________________________
____________________________________________________________________
10. Has your minimum net worth at the time of acquisition of shares at least greater than the
shares acquired or to be acquired from a financial institution?
If yes, give particulars__________________________________________________
____________________________________________________________________
11. Are you currently member of board of directors or chief executive officer in any of the financial
institutions?
If yes, give particulars__________________________________________________
____________________________________________________________________

Declaration
I am aware that under sub-article 6(b) of Article 57 of Insurance Business Proclamation No 746/2012, it is an offense to provide
false or misleading statement.

I certify that the information and/or statements given above are complete and accurate to the best of my knowledge, and that there
are no other facts relevant to this application of which the National Bank should be aware. I also undertake to inform the National
Bank of any changes material to the application.

Name ________________________________________________

Signature____________________

Date _____________________

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