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General
Information
The
Insurance Supervision and Control in Egypt
Act
No. 10 of 1981 As Amended by Act No. 91 of 1995
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.
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