New Entrants Rattle Insurance Industry, But Old Constraints Persist

Aug 17 , 2025. By BEZAWIT HULUAGER ( FORTUNE STAFF WRITER )

Two new insurance companies, Standard Insurance and Was Insurance, are poised to join the fragmented and slow-growing domestic insurance industry, eyeing to carve out niche offerings in a market long dominated by conventional players.

Backed, respectively, by Awach Savings & Credit Cooperative and Droga Pharma-affiliated stakeholders, their emergence marks both continuity and potential disruption in an industry still struggling with low penetration, structural inefficiencies, and pending regulatory shifts.

Emerging from dissatisfaction with existing market players, Standard Insurance is the product of years of behind-the-scenes organising by Awach, whose directors and managers grew disillusioned with the service quality and financial protection offered by incumbent insurers.

“The main reason for our establishment is that Awach wasn’t receiving the financial protection and quality service it needed from the market,” said Endeshaw Yibeltal, a coordinator of the founding committee.

He disclosed that aside from regulatory restrictions, the new firm plans to offer customers lower premiums. The company is still awaiting final approval from the National Bank of Ethiopia (NBE), the industry’s primary regulator.

With a paid-up capital of 135 million Br and 1,749 shareholders, the company’s ambitions are grounded in conventional offerings (general and life insurance) with its headquarters established on Queen Elizabeth II Road, in the Kebena area.

The founding process began four years ago and led to the first shareholders’ meeting a year later, where the board of directors, chaired by Mesfin Gebresellasie, and Solomon Assefa was hired as the founding Chief Executive Officer.

Organisers bank on what distinguishes Standard, not its product suite, but its foundational motive. It has a cooperative model that seeks autonomy in risk protection. The rebranding from Awach Insurance to Standard earlier this year signalled its founders' desire for broader market appeal beyond its parent SACCO. However, with only 135 million Br in paid-up capital, it remains below the National Bank of Ethiopia’s (NBE) minimum threshold of 400 million Br for general insurance and 100 million Br for life insurance, casting uncertainty over its launch slated for October 1, 2025.

While pledging lower premiums, Standard Insurance may find itself in a regulatory bind. NBE’s stringent capital requirements and final approval process remain critical limitations. The NBE has set the minimum paid-up capital at 400 million Br for general insurers and 100 million Br for life and health insurers.

"Last-minute efforts to meet minimum capital rules may not be enough to plug the gaps," an official of the NBE, who requested anonymity because he was not authorised to speak on the issue, told Fortune.

Lower premiums could also pose solvency risks if not aligned with actuarial standards, a tension industry veterans have repeatedly highlighted.

Was Insurance is also positioning itself as the first health-focused insurer, with a narrower investor base (159 shareholders) and a capital base of 76.9 million Br in paid-up capital, against 293.1 million Br subscribed. Spearheaded by promoters from Droga Pharma and Droga Health Saving & Credit Cooperative, Was Insurance sees an opening in the underdeveloped health insurance segment, where coverage stood at just 28.1pc in 2022.

According to Henok Teka, coordinator of the firm’s incorporation, the intent is to offer short-term healthcare packages with diagnostics and regular check-ups, complemented by motor insurance to stabilise cash flow.

"We're the first to specialise in health insurance," said Henok.

The company has already appointed its CEO and board of directors and now awaits approval from the NBE, although they have yet to disclose their identities.

Nonetheless, for experts, this dual strategy of socially targeted products and traditional underwriting mirrors the necessity of balancing idealism with financial pragmatism in a hypercompetitive market.

The new entrants are temporarily shielded from the new capital minimums, having been established under the older 60 million Br threshold for general insurance. But they should fully comply by 2027, a ticking clock that might pressure them toward consolidation or capital injection in the near term.

"Meeting the requirements within two years may prove too ambitious," said Mekonnen Gebreweld, former employee of the state-owned Ethiopian Insurance Corporation (EIC). "The rules mandating the conversion of subscribed to paid-up capital could also pose problems."

Both firms enter a sector that is, at once, expanding and stagnant. The number of players has ballooned to 18, potentially 20 if Standard and Was gain approval, and yet the insurance-to-GDP ratio remains below 0.5pc, among the lowest in sub-Saharan Africa.

The NBE official acknowledged the entrance of new players but cautioned that the sector’s overall growth remains limited in relation to the GDP.

Industry observers attribute much of this to the urban bias and weak rural penetration, redundant product portfolios (especially in motor insurance), low public awareness and financial literacy, the absence of foreign capital and modern underwriting tools, and inadequate technological integration, leaving the customer experience decades behind that of banking or telecom.

However, the insurance industry is well-capitalised, boasting 16.4 billion Br in aggregate capital, with post-reform profitability improving. Regulatory pressure has increased, with the NBE demanding that insurers meet capital adequacy benchmarks and convert subscribed capital to paid-up capital. However, no formal framework for consolidation exists, a glaring omission that leaves smaller firms scrambling to survive.

Insiders see market liberalisation as both a threat and an opportunity. If foreign insurance firms are permitted entry, a scenario increasingly likely given the broader liberalisation of the financial sector, domestic players could face existential pressures. More advanced products, higher service standards, and stronger balance sheets could emerge. Domestically, banks are beginning to eye insurance as a vertical expansion. Abay and Tsedey banks are reportedly preparing their subsidiaries, potentially emulating the bancassurance models prevalent in other emerging markets.

According to Asseged Gebremedhin, former EIC executive and now with AT Insurance Broker & Consultant, there is a reason to be alarmed.

“The flame of the banks will burn the insurance firms at some point,” he told Fortune.

Asseged estimated that only 40pc of existing insurers, those who have been in the industry for the past two decades, have met the NBE's requirements. He also warned of fresh challenges as foreign banks prepare to enter the domestic market, likely demanding more sophisticated insurance products, or even foreign insurance subsidiaries.

NBE officials stated that, while the broader financial sector is being liberalised for foreign capital, the insurance industry remains closed. Unlike banks, insurers have so far been shielded from the pressure of forced mergers or acquisitions, despite the looming capital requirements. Instead, they may voluntarily merge before the impending 2027 deadline.

For others, the flame may not only come from financial muscle, but also from integration capacity, with banks already possessing trust, infrastructure, and digital systems that insurers have largely failed to develop. Veteran observers caution against quick wins.

Mekonnen believes that pricing should reflect actuarial realities, not ambitions. He observed that underpricing premiums, particularly in health insurance, may offer short-term gains but endanger long-term solvency.

“Actuarial science, not ambition, determines rates,” he said.

He also noted the tax burden on premiums as a policy flaw, a structural disincentive to growth. Mekonnen emphasized that meaningful tax incentives are crucial to expanding life insurance in Ethiopia. He argued that policymakers should consider premium deductions for policyholders and income tax incentives for insurers, either in the form of full exemption or reduced minimum tax, to encourage uptake and product development. While life insurance is already exempt from VAT, he believes further alignment and corrective measures are needed to create a more supportive and coherent policy framework.

PUBLISHED ON Aug 17,2025 [ VOL 26 , NO 1320]