The federal government is to establish an independent regulator for the insurance industry, setting in motion a long overdue process, according to industry insiders. A drafting of revised financial sector proclamations, including those governing insurance, is expected to provide the legal and regulatory framework for the new insurance regulatory agency.
Alongside the legislation, the government will unveil the agency’s organisational structure and strategic plan.
“I believe it is overdue,” said Mamo Mihretu, governor of the National Bank of Ethiopia (NBE), addressing attendees at last week’s African Insurance Organisation (AIO) conference at the Skylight Hotel on Africa Avenue (Bole Road).
Deputy Prime Minister Temesgen Teruneh echoed the Governor’s resolve, noting that recent policy shifts, most notably a new proclamation allowing foreign nationals to own immovable property, could catalyse growth in housing and real estate insurance. Since early this year, the Central Bank has introduced multiple directives hoping to strengthen and modernise the insurance industry in line with international standards.
“These reforms are designed to enhance market confidence, ensure sustainability, and facilitate growth,” Mamo said.
According to Yared Molla, CEO of Nyala Insurance and the newly elected president of the African Insurance Organisation, the domestic insurance industry has struggled to live up to its full potential for decades.
“The industry has not grown to its potential,” Yared told Fortune.
Ethiopia has one of the lowest insurance penetration rates, estimated at around 0.4pc of GDP, compared with a sub-Saharan average of closer to three percent. Per capita insurance spending remains negligible. The stagnation persists despite two decades of economic growth, a population exceeding 100 million, and the emergence of a middle class. Yared placed much of the blame on structural and strategic deficiencies within the industry.
“It isn’t a lack of enabling conditions,” he said. “Rather, the industry has lacked a coherent strategy and independent oversight.”
Yared remains optimistic that the arrival of an independent regulator would usher in a new era of rapid growth and higher ethical standards. He cautioned, however, that the experiences of neighbouring countries offer both lessons and warnings.
“In Kenya and Uganda, independent regulation produced breakthroughs in innovation,” he said.
Industry operators have long debated the benefits of opening the market to foreign insurance firms. Yared views this as an opportunity to boost life insurance coverage, currently at a rate of less than six per cent, and to accelerate technology transfer, service efficiency, and competitive pricing.
“Customers will gain access to more affordable life insurance,” he said. “We aren’t doing enough. Someone else has to do it.”
Most of the 17 insurers remain overly dependent on motor insurance, which accounts for 85pc of all premiums. The geographic reach is limited, as rural populations lack access to formal insurance products, tempting insurers like Yared to eye the agricultural insurance.
“Now, we’ve at least hope,” he told Fortune. “But, it’s indeed late.”
During the three-day conference, held from May 25, 2025, Yared pledged to promote inclusivity, regulatory convergence, digital transformation, and innovation in his election speech.
This year’s conference drew over 1,900 delegates from 93 countries to Addis Abeba. Panellists were visibly bothered by the growing debt burden in at least 30 African markets and its implications for the insurance industry. Africa’s average debt-to-GDP ratio has surged from 39pc in 2008 to 72pc in 2023, driven by underdeveloped domestic markets and high interest rates.
Ethiopia’s domestic debt reached 2.3 trillion Br, and its external debt stood at 28.8 billion dollars as of 2024, according to the Ministry of Finance. Due to its low sovereign credit rating, Ethio-Re is limited to a “B” rating internationally, despite strong liquidity and a local “AA” rating.
“What matters is sovereign credit rating,” said Fikru Tsegaye, deputy CEO of Ethiopian Reinsurance S.C. (Ethio-Re). “If we’re based in a country with a stronger credit rating, we would be recognised accordingly.”
Reinsurers are judged by their host country’s creditworthiness, which limits their ability to enter international markets.
“Companies based in highly indebted countries start with a negative rating,” he said. “A company cannot escape the sovereign ceiling when it comes to ratings.”
Veteran industry figures, such as Zafu Eyesuswerk Zafu, who has advocated for an independent insurance regulator for 30 years, have faced decades of bureaucratic roadblocks that have delayed regulatory reform. He was a founding executive of the Ethiopian Insurance Corporation (EIC), which was incorporated in the 1970s through the amalgamation of private insurance companies that the military government had nationalised. Following 1991, he was a founding shareholder and CEO of United Insurance, as well as one of the founders of Hibret Bank.
“Product registration processes have been drawn out, and supervision under the National Bank of Ethiopia has been minimal,” he told Fortune.
For him, independent regulation does not mean a lack of oversight; instead, it calls for a board-supervised body led by competent professionals. While he supports opening the market to foreign investment, he cautioned that local insurers need time to become competitive.
“They’re very incapable in both monetary and human capital,” he said, but pressed the message that any protection should be temporary.
Eyesuswerk also urged for reduced regulatory constraints, such as mandatory contributions to local projects and stringent Treasury bond requirements. He argued that these rules stifle competitiveness and deter foreign entry.
“A historically rigid policy outlook has undermined growth,” he said. “Public awareness and inclusivity have been lacking for years.”
He called on NBE leadership to include a dedicated training centre within the future regulatory agency. Together with other stakeholders, Eyesuswerk has submitted a concept note to the NBE proposing the establishment of an Ethiopian Institute for Financial Studies, envisioned as a centre of excellence. The would-be institute could serve over 120,000 financial sector employees, 60pc of whom require periodic training. The NBE currently mandates that all financial institutions allocate two percent of their annual recurrent budgets for staff training.
Currently, the Ethiopian Institute of Financial Services, the Ethiopian Management Institute, both public institutions, and the private Capital Financial Excellence Centre offer short-term programs, with the latter delivering industry-specific training. However, industry experts widely regard these as providing inadequate instructions.
Industry veterans have welcomed the prospect of independent regulation, but they caution that its impact will depend on its effective implementation.
“The regulatory body is very late,” said Tadesse Roba, advisor to the CEO of Awash Insurance.
According to Tadesse, since the nationalisation of private insurance firms under the Derg regime five decades ago, the industry has operated without autonomous oversight.
“Under the new arrangement, the industry will hopefully be regulated by those who understand its intricacies,” Tadesse said.
Bunna Insurance CEO, Dagnachew Mehari, agreed that a lack of independent oversight has held the industry back, but argued that other factors are also at play.
“Despite 30 years of private sector development, the industry still lags in both asset accumulation and human capital,” he said.
As of June 2024, insurer assets were 66.6 billion Br. However, product diversity remains narrow, and insurance penetration remains under one percent of GDP. Agriculture, which accounts for nearly half of the national economy, remains largely uninsured. Life insurance coverage is weak, with 46pc of life premiums derived from pensions. The global insurance industry constitutes a seven trillion dollar market, comprising around 20,000 firms that employ 15 million people. Africa accounts for merely one percent of this market and two percent of global premiums. Of the continent’s total, South Africa represents 70pc, achieving a 3.5pc penetration rate.
“The industry cannot grow in isolation from national economic growth,” said Dagnachew, calling for enabling policies, including tax exemptions, subsidies on agricultural insurance, and premium support mechanisms. “Awareness creation is weak, and it is our responsibility to address that.”
Although premiums are projected to rise, inclusion and accessibility remain low. While many believe foreign insurers will expand access to underserved markets such as agriculture and life insurance, Dagnachew offered a more cautious view.
“They’ll not enter untested and unprofitable segments. They’ll target lucrative markets first,” Dagnachew said. “We’ve to show them first.”
Bunna Insurance is preparing to tap into a 25 million dollar agricultural risk mitigation allocation from the African Development Bank (AfDB), which has earmarked one billion dollars for the continent. The firm has begun training staff to launch agricultural de-risking initiatives.
According to Ebsa Boru, a consultant and a former employee of Oromia Insurance, with a decade of experience, independent regulation could transform the industry, so long as players are prepared for the coming reforms such as mergers and acquisitions.
“Agri and health insurances are still in their infancy,” Ebsa said.
Only Oromia and Nyala offer microinsurance. He recommended collaboration with pension funds and civil service institutions to broaden life insurance coverage, which remains widely neglected. He observed that not all countries have seen progress after attaining regulatory independence; some have reverted to government control.
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