Regulators at the National Bank of Ethiopia (NBE) have proposed a new corporate governance bill aimed at improving the insurance sector's stability. This bill focuses on qualifications, oversight, and administration, to create a robust financial market.

Officials believe the bill is designed to enhance the effectiveness of insurers, improve risk management, and support strategic and operational goals.

Martha Hailemariam, an advisor to the vice governor, emphasised the need for enhanced corporate governance in Ethiopia’s nascent insurance sector. As the country opens up to foreign financial institutions and the capital market, she believes stronger governance is crucial for improving industry quality, financial stability, and sustainability.

"Good governance is the cornerstone," Martha told Fortune.

She said the central bank is implementing stricter governance requirements to drive better returns and growth within the sector. To further bolster the industry, Martha noted that new reforms are underway to establish an independent regulator. This regulatory body will oversee the sector's supervision and stability, aiming to solidify financial soundness.

"The aim is to improve the industry," she told Fortune.

The draft directive includes fit-and-proper criteria for senior positions such as Chief Executive Officers, Board of Directors members, and Senior Executive Officers, all subject to NBE approval. It mandates a minimum degree and at least 12 years of experience in insurance operations, with five years in a chief executive role. Candidates must have at least three years of managerial experience in areas such as operations, finance, internal audit, risk management, and compliance.

Board members are required to hold a minimum of a first degree and have adequate business management experience, with a minimum age requirement of 30 years. The NBE may conduct fitness and propriety assessments to determine whether executives can continue in their roles or should be removed. The bill also allows for the suspension of the voting rights of influential shareholders and the removal of directors or senior executives if necessary.

However, the insurance industry has raised concerns about the new bill, arguing that it imposes overly restrictive regulations. Yared Molla, president of the Association of Ethiopian Insurers, stated that the industry has been burdened by excessive regulations that treat banks and insurance companies similarly.

"Banks and insurance companies should be seen differently," he said.