In December 2002, the World Bank and the International Monetary Fund (IMF) completed the Financial Sector Assessment Program (FSAP) of Egypt. The final report is not publicly available. However, a number of publications refer to the assessment, and state that Egypt's overall compliance with the international standards in different sectors of economy was positive. A 2006 report by the IMF also noted that the Egyptian authorities aim to make insurance supervision compatible with international standards and that they requested an FSAP update in 2007 to evaluate the results of ongoing reform of the financial sector. The 2007 Country Strategy Report prepared by the African Development Bank (AFDB) pointed out that the reform effort of the Government of Egypt (GoE) for the financial system have been successful. Nevertheless, important shortcomings still remain. Realizing the need to continue the reforms, in September 2004, the GoE launched the Financial Sector Reform Program (FSRP), which entails reforms in the banking sector, non-bank financial institutions, including the insurance sector; as well as strengthening enforcement capabilities of the regulatory bodies. The AFDB approved in July 2006 a loan of US$500 million for the realization of the program. However, the sources of assessment do not directly address the issue of Egypt's compliance with Insurance Core Principles (ICPs) promulgated by the International Association of Insurance Supervisors (IAIS).

General Overview

In December 2002, the World Bank and the International Monetary Fund (IMF) completed the Financial Sector Assessment Program (FSAP) of Egypt, aimed at identifying strengths and vulnerabilities of the Egyptian financial system and determining policy responses and technical assistance strategies. The final report is not publicly available. It is, however, cited in a 2007 African Development Bank (ADB) report, in which Egypt's compliance with international standards in different sectors of economy was judged "generally positive" (p. 7). A 2006 report by the IMF also noted that the Egyptian authorities "are in the process of bringing supervision in ... insurance into compliance with international best practices" (p. 18) and requested an FSAP update in 2007 to evaluate the results of an ongoing reform.

According to the Ministry of Finance (MoF), the Government of Egypt (GoE) realizes the need to strengthen the supervisory role of the Egyptian Insurance Supervisory Authority (EISA). The GoE is assisted by a number of international agencies, including the U.S. Agency for International Development (USAID) and U.S. Department of Commerce (USDoC). In 2000, the USAID completed the project "Reform of the Insurance Market, or RIM" and later commenced a new project "Modernizing Egyptian Insurance Supervision, or MEIS" which was finalized in 2003. According to the USAID/Egypt website, while the MEIS's objective was to strengthen the EISA's supervisory role and assist the regulator in implementing the reform of insurance sector, the aim of the Commercial Law Development Program (CLDP) of the USDoC was to raise public awareness of the insurance sector and to train the EISA's staff.

The 2007 Country Strategy Report prepared by the African Development Bank (ADB) noted that the GoE's efforts to reform the financial system in Egypt have been successful. Nevertheless, important shortcomings still remain. Realizing the need to continue the reforms, in September 2004, the GoE launched the Financial Sector Reform Program (FSRP) which entails reforms in the banking sector, non-bank financial institutions, including the insurance sector; as well as strengthening enforcement capabilities of the regulatory bodies. The ADB approved in July 2006 a loan of US$500 million for the realization of the program.

As stated in the EISA 2006 Annual Report, the insurance market in Egypt consists of the Supreme Council of Insurance, the EISA, the entities engaged in the insurance and reinsurance activities, 628 private insurance funds, the Government Insurance Fund, the Egyptian Insurance Federation, insurance pools, Cargo Supervision and Surveying Office of Egypt, and the Insurance Studies Institute. The main law governing the insurance sector is Law No. 10 of 1981. The law was amended in 1995 by Law No. 91 and in 1998 by Law No. 156/1998, which allowed foreigners to fully own insurance companies (USAID/Egypt website). Article 6 of Law No. 10 established the EISA as an independent body responsible for the supervision and control of the insurance activity in Egypt. Article 4 of the Law established the Supreme Council of Insurance which sets the general objectives of the insurance activity and approves the policies needed for the achievement of these objectives.

Vayanos and Hammoud, contributors to the Arab World Competitiveness Report released in 2007, note that the insurance sector in the Middle East and North Africa (MENA) was traditionally underdeveloped compared to the rest of the financial sector, due to the sensitivity of the issue from the Shari'a point of view, low awareness of insurance products, and almost non-existence of financial products that require life insurance to offset future liabilities in the event of death. The supply of insurance products in the region is characterized by a large number of small players (as measured by the capital employed) and limited presence of foreign insurers. The authors concluded that, given the low demand and the low supply of insurance products, there is a significant potential for growth in the region which will require regulators to attend to the "underlying enablers of growth," (p. 102) comprised of the legal framework, regulatory bodies, nature of competition, skills and training, and market led-initiatives. The MoF also states that there is big potential for development of the insurance sector, since total insurance premiums in 2003/2004 amounted to 1.1% of GDP, while similar economies have 4-5% Vayanos and Hammoud also report that, as of 2007, there were 20 insurance companies in the Egyptian market. Most of the companies are state-owned and they control 75% of the non-life insurance and 60% of the life insurance market.

The Egyptian Insurance Supervisory Authority (EISA) is a member of the International Association of Insurance Supervisors. (IAIS website)

The Principles

ICP 1 Conditions for effective insurance supervision

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There is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 2 Supervisory objectives

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Under Article 6 of Insurance Act, Egyptian Insurance Supervisory Authority (EISA) aims at the implementation of the following objectives: (1) to protect the rights of insurance policyholders, the beneficiaries and third parties; (2) to secure the achievement of the economic and social objectives of insurance activity and preserving the national savings and the foreign currency resources from flowing abroad; (3) to secure the soundness of the financial positions of the Insurance market units, coordinating among them and preventing any conflict between them; (4) to participate in developing insurance awareness in the country; (5) to support the insurance market and develop it; (6) to strengthen the ties of co-operation and integration with the other control and supervisory authorities at the Arab, African, and world level; and (7) to promote the insurance professions and to contribute effectively to the availability of the expertise. However there is insufficient publicly available information as to Egypt's compliance with ICP 2.

ICP 3 Supervisory authority

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Law No. 10 established the EISA as an independent body responsible for the supervision and control of the insurance activity in Egypt (Article 6). The Law also established the Supreme Council of Insurance, which sets the general objectives of the insurance activity and approves the policies needed for the achievement of these objectives (Article 4). Under Article 7 of Law No. 10, EISA is concerned with the implementation of the provisions of the Act and, in particular: (1) the supervision and control of individuals and bodies subject to the provisions of the Act; (2) the supervision and control of the Private Insurance Funds within their Act; (3) studying the legislation related to the insurance activity and expressing its view in any proposed decision or pursuit of the relevant draft laws to this activity; (4) representing the State at the international insurance and reinsurance bodies and companies in which the government decides to participate; (5) supporting the insurance studies and participating in their finance to serve the insurance market; (6) preparing and publishing the statistical data, reports and studies pertaining to the activities of the Egyptian insurance market and its units; (7) taking all the required measures to follow-up the implementation of the provisions of the Insurance Act and its regulations. However there is insufficient publicly available information as to Egypt's compliance with ICP 3.

ICP 4 Supervisory process

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There is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 5 Supervisory cooperation and information sharing

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There is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 6 Licensing

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There is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 7 Suitability of persons

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There is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 8 Changes in control and portfolio transfers

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There is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 9 Corporate governance

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According to the MoF, Ministerial Decree No.157 of 2003 introduced corporate governance requirements for insurance companies. The cecree mandated public and private insurance companies to form an audit committee from the Board of Directors (MoF n.d.). However, there is insufficient publicly available information as to Egypt's compliance with ICP 9.

ICP 10 Internal control

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There is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 11 Market analysis

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There is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 12 Reporting to supervisors and off-site monitoring

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There is insufficient publicly available information as to Egypt's compliance with this principle. However, according to Article 51 of Law No. 10, the EISA has the authority to inspect the books of insurance companies and to conduct examinations to ensure the soundness of companies' financial position.

ICP 13 On-site inspection

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There is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 14 Preventive and corrective measures

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There is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 15 Enforcement or sanctions

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There is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 16 Winding-up & exit from the market

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There is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 17 Group-wide supervision

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There is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 18 Risk assessment and management

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There is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 19 Insurance activity

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There is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 20 Liabilities

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Requirements for the liabilities of the insurance companies are specified in Chapter 9 of Law No. 10. There is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 21 Investments

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Under Article 39 of Law No. 10, the value or assets of an insurance or reinsurance company should exceed its liabilities at any time by 20% of the net premiums of property and liability transactions or 25% of the net incurred claims of the preceding year whichever is the greater, provided that the amount deducted for outward reinsurance transaction, at the time of calculating these ratios, must not exceed 50% of the gross premiums. However, there is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 22 Derivatives and similar commitments

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There is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 23 Capital adequacy and solvency

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There is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 24 Intermediaries

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There is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 25 Consumer protection

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There is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 26 Information, disclosure & transparency towards the market

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There is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 27 Fraud

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There is insufficient publicly available information as to Egypt's compliance with this principle.

ICP 28 Anti-money laundering/ Combating the Financing of Terrorism

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Rules and regulations on anti-money laundering procedures for insurance companies in Egypt are set in Ministerial Decree No. 15 of 2002 and the 2003 EISA Rules for Combating Money Laundering in the Egyptian Insurance Market. However, no information on the compliance with these regulations with ICP 28 is publicly available.