FRA sets new investment rules for insurance, reinsurance companies
Updated 2/10/2025 1:52:00 PM
Arab Finance: The Financial Regulatory Authority (FRA) has issued decision No. 2 of 2025, outlining new rules and controls for the investment ratios of insurance and reinsurance companies’ funds, as per a statement.
This move aims to provide a flexible regulatory framework that enhances investment efficiency while supporting the financial stability of the insurance sector in accordance with governance and risk management principles.
The FRA recently mandated private insurance funds to allocate part of their investments to open-ended funds focusing on stocks listed on the Egyptian Exchange (EGX).
This decision aims to improve fund management efficiency and diversify investment channels under the supervision of entities licensed by the FRA.
The new rules apply to insurance, reinsurance, Takaful insurance, specialized medical insurance, micro-insurance, and other related activities, as stipulated by Unified Insurance Law No. 155 of 2024.
The decision requires insurance and reinsurance companies to allocate at least 5% of their free funds to open-ended investment fund documents focused on listed stocks.
With FRA approval, direct investment in listed stocks may be included in this ratio.
Investments in a single fund must not exceed 5% of the company’s paid-up capital or 15% of the fund’s net asset value.
For allocated funds, at least 2.5% of the companies’ paid-up capital must be invested in open-ended investment funds that focus on listed shares.
The same restrictions on individual fund investment limits apply here, with FRA approval required for direct stock investments within the same ratio.
Additionally, the total funds invested in stocks and open-ended investment funds cannot exceed 30% of the total allocated funds.
Companies can invest up to 5% of their funds in commodity and metal investment fund documents or other financial instruments backed by metals traded on the EGX.
Individual insurance companies are allowed to invest up to 10% of their funds in real estate investment fund documents, while property and liability insurance companies can invest up to 5%.
Investments in a single fund must not exceed 5% of the total allocated funds or 15% of the fund’s net asset value.
These limits do not apply to real estate funds established by the companies themselves.
For the first time, the FRA has set controls for funds linked to investment-based insurance documents.
Insurance companies must separate these funds from other insurance documents and maintain independent accounts using an electronic system.
They must also keep a detailed record of these investments and publish returns and unit prices for individual policies at least monthly on their websites.
Existing companies exceeding the maximum investment limits must comply with the new ratios starting from the day following the decision’s implementation. They have six months to meet the minimum requirements stipulated in the decision.
The decision requires insurance companies to assess clients’ financial status, investment objectives, risk tolerance, and percentage of invested funds annually.
Companies must also develop an investment policy approved by their board of directors and the Shariah Supervisory Board in the case of Takaful insurance.
The policy must include diversification strategies, risk management frameworks, and mechanisms for evaluating portfolio performance.
Governance standards and measures to prevent conflicts of interest must be implemented to protect policyholders and beneficiaries.
Companies must submit annual investment reports to the FRA and notify it of any policy amendments.
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