Chapter Nine
Insurance and Reinsurance Companies Funds and Liabilities
Section 1
General Rules for the liabilities of Insurance and Reinsurance Companies
Article 34 - Insurance companies must reinsure part of their direct insurance transactions carried out in Egypt with the Egyptian Reinsurance Company according to a decision of the Authority's board of directors fixing the rules, quotas of these cessions and commissions to be paid by the Egyptian Reinsurance Company.
In the case of the establishment of reinsurance companies with Egyptian capital not less than 51%, a decision of the board of the Authority may redistribute the compulsory cession aiming at the national economic interest.
Article 35 - The Egyptian reinsurance companies pledge to accept the reinsurance cession
according to the decision referred to in article 34 of this Act.
Article 36 - Companies are prohibited to transact insurance business on the basis of sharing, which means that they do not fix the indemnities and benefits under an insurance policy and make some or all of the indemnities subject to the result of distributing certain amounts between the total insurance policies due at a future date.
Companies are also prohibited to do business on the basis of correlating the amount of the premium paid by the policyholder, all or part of it, with the number of policies due at a certain date with the exception of the dividends of the policyholders for the policies issued by the companies transacting the business provided for in article I (I), (2) from the surplus estimated by the actuary's report after carrying out the investigation mentioned in article 53.
Article 37 - The insurance company must establish the required technical reserves to meet
its liabilities to policyholders and beneficiaries, as follows:
First : As for personal insurance and capital redemption business:
a) The mathematical reserve, which is estimated by an actuary according to the technical
bases endorsed by the board of directors of the Authority.
b) The outstanding claims reserve equal to the value of the total unsettled claims at the
date of the balance sheet.
Second : As for property and liability insurance :
a) Unearned premium reserve
It is the amount set aside by the company to meet its liabilities for insurance transactions issued before the end of the financial year and is still in force after its end and at the following minimum ratios of the gross premiums of the company for the previous financial year.
1 - 47% for compulsory third party liability insurance arising from motor accidents.
2 - 25% for marine and aviation insurance.
3 - 40% for any other insurance transactions.
4 - 100% of the balance of premiums for long term policies pertinent to the years following the
previous financial year after deducting these years' share of the agent's brokerage paid in
the year of issue.
b) The outstanding claims reserve for the reported losses.
c) Incurred but not reported losses reserve at the date of the balance sheet according to the
rules being made by the Authority.
d) Loss ratio fluctuations reserve.
The executive regulation of this Act determines the basis of its estimation and the cases in which it is used according to each class of property and liability insurance.
In all cases, these reserves must be adequate to meet the rights of policyholders. If the Authority finds Out during examining these reserves that they are inadequate, the company must take the measures required to satisfy them according to the rules specified by the Authority in this respect.
Article 38 - Any insurance and reinsurance company should allocate funds in Egypt with a value at least equal to the value of the technical reserves mentioned in the previous article for the business carried out in Egypt.
These allocated funds must not be seized unless other funds of the company have been exhausted.
The company must maintain the funds of personal insurance and capital redemption completely separate from the funds of property and liability insurance.
The executive regulation of this Act determines the rules and ratios for investing these funds and methods of its evaluation.
Cash money and securities which form part of these funds should be deposited in one of the banks registered at the Central Bank of Egypt.
The company must give a permission to the concerned bank in order to submit to the Authority all the information requested about these funds.
Each company shall submit to the Authority statements of the funds allocated according to the provisions of this article at the dates specified in the executive regulation of this Act
The Authority shall take the appropriate action to ensure that the company is carrying out the provisions of this article.
The company shall notify the Authority of all the dispositions or final court decisions concerning the funds to be allocated as they establish a right of real estate, its transfer, its change or its abolish before declaration by registry or entry.
Article 39 - Without prejudice to the provision of the previous. article, 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.
The assets of the company should exceed its liabilities for personal insurance and capital redemption funds at any time by the following ratios :
a - equal to 0.3 % of the exposure funds of insurance contracts in force including reinsurance. That amount will be reduced by not more than 50% for reinsurance.
b - equal to 4% of the mathematical reserves including reinsurance. That amount will be reduced by not more than 15% for reinsurance. In all cases, the required increase of the value of assets over liabilities referred to shall not be less than the paid up capital.
The board of directors of the Authority will issue a decree regarding the rules of fixing the elements of the assets and liabilities of insurance and reinsurance companies for calculating the ratios mentioned in this article.
Article 40 - The Insurance company may not contribute in another company's capital
transacting the same activity in Egypt.
Insurance and Reinsurance Companies are obliged to the following:
1 - The value of all types of shares owned by the company must not exceed the ratio
determined by the decision of the competent minister issued on the ground of the
recommendation of the Authority's board of directors.
2 - The value of sharing of the company's capital must not exceed 5% of the company's
investments in the previous financial yea, and not exceeding 20% of the company's capital.
3 - The company must not contribute in companies other than the stock companies provided
that the percentage of contribution, loans, guarantees, and bonds in one company must not
exceed the ratio mentioned in item (2).
4 - Not entitled to grant any loans or renew them without securing adequate guarantees. In all
cases, the amount of any loan must not exceed 1.5% of the total company's investments.
As for loans with registered estate mortgages, the amount of these loans must not exceed
60% of the amount of the mortgaged estate.
5 - Not entitled to give guarantees to other parties whatever their kind beyond the classes of
insurance specified in article I, clause (I). item (2).
Article 41 - The beneficiaries of the policies effected and carried out by the company in Egypt shall have a privilege over the allocated funds according to articles 37 and 38 which comes next to the privilege stipulated in article 1141 (a) of the civil code and the department concerned shall certify through declaration and notarization at the request of the Authority of this privilege on the margin of each register or entry of these funds and shall notify the Authority of every not bene.
Article 42 - All revenues from stocks and loans granted by the insurance company and all kinds of deposits that should be allocated according to articles 37 and 38 are exempted from the taxes on the earnings of mobile capitals.
Article 43 - A fund shall be set up and called a policyholders' guarantee fund and the relative beneficiaries of insurance companies registered at the Egyptian Insurance Supervisory Authority. It will have the legal entity and separate balance sheet. It will be subject to the supervision of the Authority with its headquarters in Cairo and it aims at the compensation of policyholders and beneficiaries of the policies due to the company's inability to meet its liabilities. The Constitution of the fund shall be passed by a virtue of the Prime Minister's decree through the proposal or the competent minister after getting the Authority's view. The constitution should in particular include
a) The objectives of the fund, means of its implementation and regulating the relation between it
and the Authority.
b) Membership subscription, its terms and the amount of the annual subscriptions of member
companies.
c) Work system of the fund and the formation of its board of directors.
d) Guarantee scale and maximum amount of compensation of the fund.
e) The financial sources of the fund rules and items of expending thereof.
I) Audit of the fund accounts.
Section 2
Records and Accounts of Insurance and Reinsurance Companies
Article 44 - Each insurance company shall keep the following registers for each class of
business
a) The policies register in which all the policies effected by the company are to be registered. It includes the names and addresses of the policyholders, the date of issue, duration of the policy, the sum insured and the amendments and changes taking place.
b) The claims register in which all claims submitted to the company are entered. It includes the date of each claim, the name and address of the policyholder, the policy number, the estimated reserve for the casualty and date of the claim payment. In the case of repudiating the claim; its date and reasons shall be mentioned.
c) The intermediaries register in which the company registers the name and address of every intermediary who intermediates in transacting insurance business for it.
d) The treaties register which includes the facultative and treaty transactions. All treaties concluded by the company are entered in it. It shows the names and addresses of the other parties to the treaty, the date of every treaty, its expiry date, any changes that might occur and any other additional information the company deems significant to the treaty.
e) The legally allocated funds register which is to be notarized by the Authority. It shows the invested amounts of the funds to be legally allocated in Egypt and the changes relating to the formation of these funds. The funds relating to life assurance transactions shall be registered separately. As for reinsurance companies, they shall keep the two registers referred to in items (d) and (e) of this article.
Article 45 - The Authority determines the date for the beginning and ending of the financial
year of insurance and reinsurance companies.
Article 46 - The company shall keep separate accounts for every class of insurance. The board of the Authority may moreover ask the company to keep an account for one or more kinds or insurance business that come under one class.
Article 47 - The company shall submit annually the following data and accounts to the
Authority in the date specified in the executive regulation
a) The balance sheet
b) The profit and loss account
c) The appropriation account.
d) The separate revenues and expenditures account for every class of insurance
e) Summary of the reinsurance treaties.
f) The statement of the legally allocated funds to be maintained in Egypt according to the
provisions of this Act. This statement shall be supported by the documents requested by the
Authority. A report on the company's transactions during that year shall be enclosed. These
data shall be prepared according to the forms specified in the executive regulation and
include all the transactions carried out by the company in Egypt and abroad separately.
These data and documents applied under the provisions of the Act should bear the signature of the chairman of the company and its financial manager. As for the data relating to life assurance and capital redemption, it shall also be signed by the actuary.
Article 48 - Without prejudice to the rules of the Central Organization for Accounting, a company's accounts shall be audited by an auditor appointed by the general meeting of the company from the auditors recorded in a register to be established at the Authority in consultation with the Central Organization for Accounting. It is not permitted to the auditor to audit more than two companies accounts. The company shall put at the disposal of the auditor all the books and documents necessary for carrying out his job. The chairman of the Authority, if necessary, shall commit to another auditor to implement a specific assignment against fees paid by the company.
Article 49 - Each insurance or reinsurance company must provide an annual report to the Authority issued by its auditor. The report shall state that the balance sheet, profit and loss account, revenue and expenditure and allocated funds established to meet the company's liabilities in Egypt, and have been properly prepared and they give a true and fair view of the company's financial position according to its books and the other data put at his disposal.
The auditor shall notify simultaneously both the company and the Authority of any deficit, mistake or any irregularity he finds out during his investigation.
The company shall offer an actuarial report which proves that the technical reserves of personal insurance transactions are estimated according to the approved technical bases.
Article 50 - Fifteen days notice must be given by the company to the Authority specifying the date, place and agenda of the general meeting. It shall also provide to the Authority a certified copy of every report provided to the shareholders or policyholders on the company's transactions once that action takes place it shall provide the Authority with a copy of the minutes of each general meeting within thirty days of the date of meeting.
The Authority shall have a representative at the general meeting but without having voting counted
Article 51 - The Authority has the right to inspect at any time the books and records of insurance and reinsurance companies subject to the provisions of this Act, to ensure obtaining the data and clarification required to confirm the implementation of the provisions of this Act
This sight shall take place at the offices of every company and carried out by the Authority's inspectors and their assistants who shall have the status of the judiciary officers according to article 95 of this Act.
Section 3
Specific Provisions of Personal Insurance and Capital Redemption
Article 52 - The companies transacting the insurance business specified in article I, clause (I), item (1) of this Act may not discriminate between policies of the same kind in respect of insurance rates, the amount of dividends of the policyholders or other conditions, unless this discrimination is due to the difference of life expectancies, except of the following :
1 - Insurance policies of special conditions for insuring the lives of the members of one family
or a group of people of one occupation, work or any other social relation.
2 - The policies of big sums insured which have reductions approved by the Authority.
The board of the Authority may authorise the company to issue less rated policies than the
ordinary rates in the case of justifiable reasons.
Article 53 - The companies stipulated in the previous article shall examine the financial position of life assurance and capital redemption classes and evaluate the outstanding liabilities at least once every three years by an actuary. This evaluation deals with all the insurance transactions carried out by the company in the Arab Republic of Egypt and abroad separately. This evaluation shall be made whenever the company seeks to examine its financial position for fixing the dividends of the shareholders or the policyholders.
The Authority may, if it deems it necessary, and upon the approval of its board demand this evaluation at any time before the lapse of three years provided that one year has lapsed since the last examination.
The executive regulation fixed the data to be included in the actuarial report. A copy of the report shall be sent to the Authority within six months of the examination date, accompanied by a declaration from the managers of the company certifying that all the data and information needed to reach a correct estimation of the company's commitments were put at the disposal of the actuary.
The Authority may after the expiry of six month period, give the company an additional grace period to submit this report, not exceeding three further months.
Article 54 - If the Authority finds that the actuary's report does not indicate the company's financial true position due to applying wrong bases for the evaluation, it may after hearing the company's representatives, order the re-examination specified in the above article at the expense of the company.
Article 55 - The companies stipulated in Article 52 of this Act, may not deduct any part of its funds directly or indirectly to meet their commitments arising from insurance policies to distribute it as a profit to the shareholders or policyholders, or to pay any amount other than their liabilities under the insurance policies issued by them.
The dividend of shareholders or policyholders is confined to the amount of the surplus fixed by the actuary in his report after the examination mentioned in article 53 of this Act and the distribution of that dividend shall be made according to the rules stipulated in the executive regulation of this Act. Without prejudice to article 38 of this Act, funds of the company in Egypt and abroad to which this article applies may be considered as one unit.
Article 56 - The companies stipulated in article 52 are prohibited to give loans to their managers or employees either by a guarantee or a real estate mortgage or a personal guarantee unless the company has unallocated funds of its net profits exceeding the allocated funds in accordance with articles 37 and 38 of this Act. Loan guaranteed policies are exempted or that prohibition provided that the loan is not exceeding the surrender value of the policy.
Article 57 - The Authority may authorise the insurance companies stipulated in article 52 to run a lottery. The sums given for every winning policy may not exceed the capital due in its maturity date. This provision shall not apply to the policies issued with different conditions before the application of the Act. The lottery takes place in the presence of the Authority's representative.
The chairman of the Authority issues a decision on the conditions of the lottery and how to declare its results within the framework of the applied laws
Article 58 - In the case of bankruptcy or liquidation of one of the companies stipulated in article 52, the sums due to each policyholder of an unexpired policy is estimated as an equivalent to its mathematical reserve at the date of the court's sentence of bankruptcy or liquidation, calculated according to the technical rules of the tariff of premiums as at the date of issuing the policy and the bases of establishing the technical reserve.
|