The Egyptian Financial Supervisory Authority has issued a decision to update the subscription and pricing policies for credit and guarantee insurance documents. The decision, signed by Dr. Islam Azzam, the head of the authority, aims to develop subscription and pricing policies, as well as reinsurance and risk management, in the insurance sector. This move seeks to achieve the highest level of financial discipline and stability. The updated policies will apply to property and liability insurance companies licensed to practice credit and guarantee insurance.
The decision includes clear obligations for companies regarding mandatory bearing and credit grantor participation in risk. It stipulates that the percentage of the insured party or credit grantor should not be less than 25% of the existing balance of the financing or credit facility insured by the insurance company at the time of the risk occurrence. This percentage cannot be insured, redistributed, or transferred to others directly or indirectly.
The decision prohibits side agreements that may alter the scope of coverage, reduce or eliminate the bearing percentage, or modify compensation terms. Any amendments to coverage, rights, or obligations must adhere to the rules for approving insurance documents and products. Insurance companies must include essential elements in their written subscription policies for credit and guarantee insurance.
These essential elements include acceptance and rejection criteria for risks, creditworthiness assessment methods, required bearing and guarantee ratios, maximum exposure limits, concentration limits for individual clients and related groups, and economic sector and financing type. The policy must also cover follow-up procedures for default, recovery, and collection, reinsurance policy, early warning indicators, and procedures for addressing these indicators.
The updated policies aim to improve risk management in the insurance sector and ensure financial stability. By setting clear guidelines and obligations, the Financial Supervisory Authority seeks to enhance discipline and oversight in the industry. This move is expected to have a positive impact on the Egyptian insurance market.
The decision applies to property and liability insurance companies licensed for credit and guarantee insurance, excluding commercial credit and guarantee insurance. The authority may determine higher bearing percentages for specific risk types or portfolios based on risk indicators, loss rates, and portfolio nature.
The Egyptian Financial Supervisory Authority's decision demonstrates its commitment to developing and regulating the insurance sector. By updating subscription and pricing policies for credit insurance, the authority aims to promote a more stable and disciplined insurance market in Egypt.
Key points
- The Egyptian Financial Supervisory Authority updates policies for credit insurance subscriptions to enhance risk management and financial stability.
