Currency

Insurers increase capital to counter impact of depreciation of local currency


Insurance companies are seeking to increase their paid-up capital under pressure from credit rating agencies and reinsurers concerned about the impact of the decline in the value of the Egyptian pound against the dollar.

Wethaq Takaful Insurance managing director Adel Fatoury said that the need to increase the capital of insurance companies is urgent following the 6 March 2024 flotation of the Egyptian pound, reported Al Mal News. The exchange rate currently hovers at EGP47 to the greenback compared to EGP31 before the flotation.

Mr Fatoury said that capital increases are needed to support the financial solvency of the insurers and for them to meet their various obligations, especially to policyholders.

He indicated that the capital of insurance companies should not be less than EGP600m ($12.7m) for them to be able to face the various challenges and risks.

In contrast, the minimum capital at present for insurance companies under Law 10 of 1981 is about EGP60m, while the draft of the unified insurance regulation law now before Parliament stipulates a minimum capital of EGP250m.

On his part, Mr Othman Shehata, an independent financial consultant, called on insurance companies to raise their capital to at least EGP500m. He added that the capital of insurance companies is currently EGP300-400m on average.

He said that insurers’ application of IFRS17 would involve a re-evaluation of the sector’s liabilities and assets and would therefore lead to the need to increase the capital base.

The current financial year ending 30 June 2024 (FY2024) is a pilot year in Egypt for adopting IFRS17, which is set to be implemented at the beginning of FY2025.


 



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