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Monday, 12 October 2020

Insurance companies face new capital requirements to protect against EAS risk

REGULATION WATCH- Insurance companies will now be required to hold 1% of assets in reserve after the Financial Regulatory Authority (FRA) yesterday introduced new capital requirements designed to protect insurers against risks associated with applying the new Egyptian Accounting Standards (EAS), the regulator said in a statement yesterday. Due to come into force between January and July 2021 (depending on the company’s fiscal year), the EAS 47 standard will require insurers to set aside more capital as loan loss provisions, a move that could potentially put pressure on companies’ balance sheets. To guard against this, the FRA has instructed insurers to hold reserves equivalent to 1% of assets and net profit reported in FY2019-2020. Insurers are expected to put aside EGP 1.2 bn in reserves as a result of the changes.

New capital requirements coming for other NBFS? The regulator is looking at ways to manage the risks associated with the EAS for other non-banking financial services activities, the statement said without providing further details.

In other insurance news: State-owned Misr Insurance is in the final stretch of setting up a new financial leasing and factoring arm as it looks to expand into other non-banking financial services, Misr Insurance chairman Basil El Hini told Hapi Journal.

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