Part 2: Insurance Sector Activities and Companies, Their Related Services, and Regulatory Aspects in Egypt

Overview

Building upon the significant changes outlined in our previous publication, this article explores the comprehensive regulations established by law no. 155 of 2024 promulgating the Unified Insurance Law (the “Law”), which governs insurance and reinsurance activities in Egypt. This landmark legislation consolidates and modernises regulations, providing a clear framework for various insurance contracts and activities within the sector. Additionally, it outlines the roles of related services and professions involved in insurance operations, ensuring a cohesive regulatory environment.

Important Definitions

i. Specific Types of Insurance Contracts in Egypt

The Law specifically defines three (3) types of insurance contracts:

A. Insurance Contract:

A legally binding agreement between an insurer and an insured party, wherein the insurer commits to pay a sum of money, a fixed income, or other financial compensation to the insured or a designated beneficiary upon the occurrence of a specified incident or risk, in exchange for premiums paid by the insured.

B. Reinsurance Contract:

A legally binding agreement between a reinsurer and an original insurer, whereby the reinsurer agrees to indemnify or compensate the original insurer for all, or part of the losses incurred under the original insurance contract, in exchange for reinsurance premiums.

C. Takaful Insurance Contract (the "Mutual Insurance"):

An agreement among participants facing a common risk(s),who contribute in paying an amount (the “Subscription”) to a shared fund. Compensation is provided from this fund to those who are eligible.

ii. Definitions of Specific Types of Insurance in Egypt

• Life Insurance: which covers risks related to the lives of individuals, including death, total or partial disability, and reaching a specified age. It may also include pension plans and policies linked to investments in securities and financial instruments.
• Long-Term Personal Accident Insurance: which applies to insurance operations lasting more than one (1) year and covers risks related to accidents causing death or disability.
• Long-Term Medical Treatment Insurance: which covers insurance operations exceeding one (1) year, aimed at providing cash benefits in cases of disability due to illness and covering medical treatment expenses.

iii. Other Definitions

The Law also provides detailed definitions for key terms, including the Activity of Healthcare Programs Management Companies, Fund Formation, Related Parties, Private Insurance Fund, and Public Insurance Fund.These specific related professions and activities will be thoroughly examined in Part III of our article

Types of Insurance Activities in Egypt and Their Scope of Application

The Law provides an exhaustive list of types of insurance activities that can be undertaken in Egypt. It specifies that the sectors listed below can also be licensed by the Financial Regulatory Authority (“FRA”) to operate under the following Mutual Insurance style. The Insurance sectors and types are categorised as follows:

i. Personal Insurance and Fund Formation Operations

This type of insurance sector includes the following scope of application:

• Life insurance.
• Long-term personal accident insurance.
• Long-term medical treatment insurance.
• Pension payments insurance.
• Fund formation operations.

ii. Property and Liability Insurance

This type of insurance activity includes the following scope of application:

• Fire insurance and associated risks.
• Transport risks insurance such as land, river, sea and air, and related liability insurance.
• Hull, machinery, and stores insurance for ships and aircraft and related liability insurance.
• Comprehensive motor vehicle insurance and related liability insurance, including compulsory civil liability insurance.
• Engineering risks insurance and their related liabilities insurance.
• Petroleum, energy, and agricultural insurances and their related liabilities and risks.
• Credit default risks insurance.
• Short-term medical treatment insurance.
• Cyber risk insurance.

iii. Specialised Medical Insurance, Long-Term and Short-Term Insurance, and Related Services and Activities

This type of insurance activity encompasses specialised medical insurance services and activities, including both long-term and short-term coverage.

iv. Micro-Insurance

This type of insurance activity provides coverage for smaller-scale insurance needs.

Entities Engaged in Insurance and Reinsurance Sector

The Law outlines the structure of the insurance sector and related professions and activities. It specifies the entities authorised to engage in insurance and reinsurance activities, including:

• Insurance and reinsurance companies.
• Mutual insurance and reinsurance companies.
• Specialised medical insurance companies.
• Micro-insurance companies.
• Insurance pools.
• Government insurance funds.
• Private insurance funds.

The Insurance Cases and Their Limitation Period

Lawsuits arising from insurance or reinsurance activities must be filed within three (3) years of the occurrence of the matter, otherwise, they are subject to limitation. However, the Law provides several exceptions to this limitation period.

i. Insurance Companies

The Law mandates that the FRA Board of Directors establish governance rules, required disclosures and compliance periods for insurance and reinsurance companies. Companies are also required to develop internal regulations including work policies, risk management, financial solvency and dealing with customers.

The Law requires companies to maintain technical reserves to meet obligations towards policyholders and beneficiaries, as verified by an FRA-registered actuary. Specific record-keeping requirements are outlined for:

1. Personal insurance and fund accumulation operations.
2. Liabilities and property insurance.

The FRA is tasked with setting criteria and standards for regulating and supervising insurance and reinsurance companies, including regular examinations to ensure financial stability and legal compliance.

ii. Long-term and Short-term Specialised Medical Insurance Companies

The Law extends the FRA’s oversight to companies offering long-term and short-term specialised medical insurance, requiring these companies to comply with all applicable legal provisions.

iii. Mutual Insurance and Mutual Reinsurance Companies

The Law provides specific establishing requirements for licensing and regulating Mutual Insurance and Reinsurance companies. Accordingly, it specifies the composition, competencies, and roles of the Committee of Islamic Supervision and the obligations of Mutual Insurance companies operating under the Mudaraba System.

Policyholders Guarantee Fund

The Law establishes the Policyholders Guarantee Fund, defines it as a legal entity under FRA supervision, to compensate policyholders and beneficiaries if companies fail to meet their obligations.

Digital Transformation in the Insurance Sector

The Law facilitates the electronic issuance of insurance policies (the “e-policies”) and requires companies to follow FRA BOD requirements while issuing it,  allowing the insured person directly to print it, and while marketing and distributing the e-policies by one of the listed entities.

Also, the Law gives competency to FRA BOD to set requirements for authorizing such license issuing and websites creation, for transparency and customer disclosure. Companies must adhere to conditions and requirements set by the FRA for digital services.

Regulatory Measures and Procedures

The Law grants the FRA Board of Directors authority to take measures to maintain market stability and protect policyholders, including:

• Restructuring company activities.
• Requiring capital increases.
• Merging companies.
• Revoking licenses.
• Dismissing board members.

Termination of Activity, Transfer of Documents, Suspension of Work and Repeal of Licenses

This section modernises the previous Chapter 11 of Law No. 10 of 1981 by detailing the processes for repealing licenses, document transfer and publication requirements. The Law currently requires publishing the decisions of the FRA Board of Directors on the company’s websites instead of the Official Gazette.

However, Article 204 specifies conditions under which the FRA may revoke a company’s license, such as in the case of illegal acquisition of the license, repeated legal violations, inadequate capital, non-compliance with FRA inspections and bankruptcy.

Concluding Key Provisions

The Law stipulates final specific provisions regulating the following:

i. The authority of the FRA chairman and representatives to cease unlicensed activities.

ii. The requirement for insurance transactions in Egypt to be conducted through licensed companies.

iii. The obligation imposed on companies to pay annual fees to the FRA for product pricing review and related services.

iv. The permission granted to insurance and reinsurance companies to open offshore accounts for specific purposes.

v. The recognition of existing registrations in FRA records as valid licenses under the new Law.