Page 5 - Print Version Volume 22 - Number 1126

Fortune Vol. 22 No. 1126 Nov. 28, 2021 NEWS Page 5

Central Bank Spurns . . . (Cont'dfrom PAGE1)
investment amount down to five
or seven percent.

However, the regulators rejected
the request and communicated
their decision to the Association
on November 25, 2021. A letter
signed by Belay Tulu, head of the
insurance supervision directorate
at the NBE, says the insurers'
appeal is not "authentic" and
"does not align" with the national
development agenda.

Reads the letter: “The alleged
negative impact on the growth and
development of the industry and
discouragement of investment in
the sector posited as grounds for
scaling back the 15pc minimum
investment threshold was not
substantiated by any evidence and
lacks authenticity.”

Industry observers believe the The central bank's insurance supervision directorate maintains that there is insufficient evidence backing insurers' claims that the 15pc investment
requirement by the NBE would requirement will hurt their bottom lines.
have no significant impact
on the insurance companies. aggregate capitalisation of 10.6 bonds. The bonds give two The plea the Association leaders are set aside from net profit,
Abdulmenan Mohammed, a billion Br, with the 17 private percentage points higher than the made with the regulators failed according to a Chief Executive
financial analyst, does not see insurance firms accounting for interest rate on saving deposits to include concerns over the low Officer (CEO) of one of the oldest
the requirement threatening their close to 72pc. with a three-year maturity period. yield rate. The letter from the private insurers companies.
liquidity position and profitability. Insurers earn a significant income lobby group did, however, request
The CEO is also displeased with by saving their money in the form clarification on the definition of “A quarter of the net income
"The impact will not be that the central bank's allegation that of time deposits. The average net income. While the regulators of insurance companies will be
considerable," he said. the plea was unsubstantiated. saving interest rate stands at eight say the investment is to be made tied up,” the CEO told Fortune.
percent, while the yield on time from net income, they remained “This will make the industry less
The industry feels otherwise. "I assume they're telling us to deposits can reach 15pc. unclear whether it factors legal attractive to investors.”
The central bank's requirement conduct a study," the CEO told reserves. They later clarified net
fails to consider the industry's Fortune. “Yet, the NBE itself “Investing in DBE bonds is like income is profit after tax. Insurers had also appealed
capability, says a senior executive didn’t conduct any study before it losing money intentionally,” says to extend the directive's
of a private insurance company. picked the minimum threshold." the CEO of one of the insurance The industry remains unclear enforcement date to July 1,
companies that entered the where the mandatory investment 2022, from September 1, 2021.
“Although its impact differs, its Industry players are concerned market recently. is deducted before legal reserves Regulators at the NBE did not
effects will be felt across the with the low yield rate of DBE deem it fit to accept the proposal.
industry,” said the Chief Executive
Officer (CEO).

The insurance industry has an

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