1. COURSE TITLE: RISK
MANAGEMENT
OPERATION OF INSURANCE BUSINESS IN ETHIOPIA
Mine project of insurance operation of insurance business in case of
awash insurance company
By mesfinabera180@gmail.com
2. Introduction
• 1.1. General Objective:
• The general objective of this study is to examine the overall operations of Awash Insurance
Company in Ethiopia, identify the challenges encountered by the company in the insurance
business and recommend possible strategies for improvement.
• 1.2 Specific Objectives:
•
• To analyze the insurance products offered by Awash Insurance Company and their market
acceptability.
• To examine the claim settlement process of Awash Insurance Company and identify the
factors that affects the efficiency and effectiveness of the process.
• To assess the performance of Awash Insurance Company in terms of profitability, growth,
and market share in the Ethiopian insurance industry.
• To identify the key challenges that the company faces in its operations, such as regulatory
compliance, competition, and changes in customer preferences.
• To provide recommendations for Awash Insurance Company to improve its operations and
enhance its competitiveness, such as diversifying its product portfolio, improving customer
service, and investing in technology and innovation.
•
3. Definitions of Insurance
• Insurance can be defined from economic, legal, business and social point of
views.
• In Economic Sense, insurance is a mechanism of providing certainty or
predictability of loss With regard to pure risk. It accomplishes these by policy or
charity of risk. By reducing uncertainty in the business environment, it will
create peace of mind that enables businessmen
• Focus on their primary activities instead of worrying about the existence of
possibility of loss
• So that societies can grow more.
• From Legal Point of View, insurance is a contract whereby, a consideration
(price) paid to a
• Party adequate to the risk, becomes security to the other that he shall not suffer
loss, damage
• or prejudice by the happening of risks specified in the contract for which he may
be exposed to. From Business Perspective insurance is defined as a cooperative
device to spread the loss caused by a particular risk over a number of persons
who are exposed to and who agree to
• Ensure them against that risk.
4. Legal foundation
• )
• 2.2 Minimum Paid - Up Capital Requirements
• The minimum paid - up capital required to obtain a general insurance
business license shall be Birr 400 million ( four hundred million Birr ) ,
which ought to be fully paid - up in cash and deposited in blocked bank
account ( s ) in the name of the insurance company to be established .
• The minimum paid - up capital required to obtain a long - term
insurance business license shall be Birr 100 million ( one hundred
million Birr ) ,which ought to be fully paid - up in cash and deposited in
blocked bank account ( s ) in the name of the insurance company to be
established .
• The minimum paid - up capital required to obtain both general and long
term insurance businesses license shall be Birr 500 million ( five
hundred million Birr ) , which ought to be fully paid - up in cash and
deposited in blocked bank account ( s ) in the name of the insurance
company to be established .
5. 2.3 Proclamation No. 746/2012.
Proclamation to Provide
• .1 Licensing Insurance Business
• Requirement for Obtaining License
• 1/ It is prohibited to transact insurance business in Ethiopia without
obtaining and insurance business license from the National Bank.
• 2/ No person may use the word ‘‘insurance’’ or ‘‘insurer’’ or its
derivatives as part of the name of any financial business unless it has
secured a license from the National Bank.
• 3/ Without the prior written approval of the National Bank, no insurer
may:
• a) Carry on insurance business at any place other than that authorized
by the National Bank, or closes an existing place of business;
• b) Introduce new insurance products;
• c) Merge with or takeover the business of another insurer;
• d) Alter the name under which it is licensed to carry on insurance
business.
• 2.3.2 Conditions of Licensing
6. Legal foundation
• 2.3.2 Conditions of Licensing
• 1/ the following conditions shall be fulfilled to secure an insurance business license:
• a) A duly completed application in the prescribed format together with other
accompanying documents as may be specified by directive shall be submitted;
• b) An investigation fee, as specified by the National Bank, shall be paid at the time of
submitting the application;
• c) upon filing the application with the National Bank, the founders shall, at least once a
week for a period of four consecutive weeks, publish, in a form prescribed by the
National Bank, a notice of intention to engage in insurance business in widely circulating
• Newspapers;
• d) The insurer shall be formed as a company and its memorandum and articles of
association shall be approved by the National Bank before registration with the
appropriate government organ;
• e) The minimum paid-up capital prescribed by the National Bank shall be paid in cash
and deposited in a blocked bank account in the name of the prospective insurer;
7. Legal foundation
• .3.3 Issuance of License
• 1/ After evaluating all the relevant information, the National
Bank may decide to issue a license to an applicant, with or without
conditions or limitations, if it is satisfied that the requirements for
a license have been met.
• 2/ the conditions or limitations to which a license shall be subject
may, among others, include:
• a) Limitation on the class of insurance that may be written;
• b) Limitation on the validity period of the license;
• c) Limitation on the amount of premium that may be written in a
particular period or Class of insurance;
• 2/ The National Bank shall decide on an application to carry on
insurance business within 90 days from the last date of receipt of
all information to be submitted in accordance with sub-article (1)
of Article 4 of this Proclamation.
8. DISCUSSION Historical Overview
• The historic establishment of Awash began in October 1, 1994, with 456
shareholders and Birr 4.8M in paid-up capital.
• Commenced Operation: January 2, 1995
• Within the first year alone, average return on Paid up capital rose to 20%
and subsequently, GWP showed steady growth over the period.
• 1997 – 1999
• Awash grew its capital from Birr 4.8M to Birr 15M and captured around 8%
of market share of the total Insurance Market in Ethiopia. Paid up capital
rose to almost Birr 20M
• 2000 – 2003
• In the new millennium, Awash diversified its produces through the
introduction of life services. With a growing number of staff and branches,
net profit before tax reached over 10 M as well as portfolio investment.
• 2004 – 2008
• The period was brought in through awash’s 10 – year anniversary which
was colorfully celebrated and was followed with the preparation of the
first strategic plan covering the period between 2007 and 2011.
9. Stakeholders of Insurance Business
• There are several stakeholders in the insurance
business in Ethiopia, and their roles are as follows:
• 1 insurer:
• 2 reinsurer:
• 3 regulators:
• 4 customers:
• 5 Agent and brokers:
• 6 employee:
• 7 investors:
10. Type of Insurance Products
1. General insurance
2. Motor compressive
3. Burglary
4. Fire and lighting
5. Consequential
6. Marine inland
7. Carriers
8. All risk
9. Engineering
10. In Dilla branch the product service are
11. Life and health
Awash Insurance Company(S.C) transacts Life and Health Insurance as
follows:
Term Assurance:
Individual &
Group Life;
Endowment Assurances:
10, 15, 20...35 Years Endowment,
Anticipated Endowment,
Endowment Annuity &
Education policy
Whole Life (Endowment at age 85);
Riders:
Accident Insurances:
Supplementary Accident Insurance (SAI)
Comprehensive Accident Insurance (CAI)
Waiver of Premium
Medical Expenses Insurance
12. • Awash Insurance Company(S.C) provides travel insurance cover to different Geographical
areas.
•
• 1. Travel Protect Plans
• Africa : provides coverage within Africa and surrounding islands, except country of
residence.
• Asia : provides coverage within Asia & surrounding islands.
• Israel : provides coverage within the State of Israel.
• Europe : all European countries including those in the Schengen Area.
• Worldwide : provides Worldwide cover except the country of residence.
• 2. Students Travel Protect Plans
• Europe : all European countries; Schengen Area included.
• Worldwide: provides Worldwide cover except the country of residence.
• 3. Haji &Umrah Travel Insurance
• Haji &Umrah: provides coverage in Medina and Mecca located in Saudi Arabia.
• 4. "Corporate" Plan
• Worldwide: provides worldwide cover except the country of residence.
• One Year BLANKET Policy :several employees with 30 or more people constantly travelling
throughout the year can be covered during the validity of the policy for journeys declared
13. Current liabilities
• 1.1.2. Finance and Accounting
•
• Conceptually speaking, the relationship between finance and accounting has two dimensions (i)
•
• they are closely related to the extent that accounting is an important input in financial decision
•
• making and (ii) there are key differences in view point between them. Accounting function is a
•
• necessary input in to the finance function. That is accounting is a sub function of finance.
•
• Accounting generates information/ data relating to operations/ activities of the firm. The end
•
• product of accounting constitutes financial statements such as the balance sheet, the income
•
• statement, and the changes in financial position/ sources and uses of funds statement/ cash flow
•
• statement. The information contained in these statements and reports assists financial managers in
•
• assessing past performance and future directions of the firm and in meeting legal obligation such
