The central bank is amending its directives to raise insurance company investment ceilings on acquisition and construction of buildings; and to ease the maximum liquidity level imposed by the central bank previously.

The new directive will enable insurance firms to invest up to 25pc of their total assets derived from their general insurance business on acquisition and construction of buildings, up from the current 10pc. It will also reduce the requirement to maintain 65pc liquidity of their total assets to 50pc.

The seven-page draft incorporates an article that enables insurance firms to invest 20pc of the assets resulting from the general insurance business in equity ownership of shares of different companies including the Ethiopia Reinsurance Company (EthioRe).

In addition, the directive allows insurance companies to invest 30pc of assets originating from their life insurance business in the acquisition and construction of buildings.

Currently, each insurance firm has up to 50 million Br invested in EthioRe, the two-year-old reinsurance company whose authorised capital reached 997.3 million last fiscal year.

Finalised as the first draft, the central bank sent the directive to the Ethiopian Insurance Association and insurance firms for comments and feedback.

“The Bank's recent proactive and reactive response to the industry is appreciated,” says Tibebe Tesfaye, CEO of Global Insurance Company, which has invested in constructing its own headquarters, in a recovery yard and in a vehicle inspection centre. “We can now have more room to get income from investment rather than just operations."

Five of the 17 insurance firms operating in the country - Nile, Nib, Nyala, Oromia and United – are in the process of constructing their headquarters for a total investment of 5.5 billion Br.

Nib Insurance was obliged to withdraw its investment from its joint head office construction with Nib Bank two years ago, as it can only invest 10pc of its assets on buildings.

“While it’s good to see the changes, the governing bank needs to ease the regulation further,” said Zufan Abebe, CEO of Nib Insurance Company.

In the previous directive, firms are obliged to reserve 65pc of their assets in liquid form, in cash or time deposits. The new directive reduced the amount to 50pc. Also, the firms used to invest up to 10pc of total assets in their choice of investment but now that figur has been reduced to five percent.

In addition, the insurance firms surrender some of their operating income toward reinsurance, thereby reducing their risks.