الهيئة العامة للرقابة المالية

• The new resolution establishes a clear, updated regulatory framework for financial solvency margins which strengthens proactive supervision and enhances risk management.
• The Authority pays great attention to the nature and quality of assets included in the solvency margin calculations.
• The Authority has effective regulatory powers to intervene if an insurer’s solvency margin falls below the required limits.

In an effort to continuously enhance the stability of the Egyptian insurance sector, FRA Board of Directors headed by Dr. Mohamed Farid, issued Resolution No. 148 of 2025 concerning the financial solvency standards required for insurance and reinsurance companies.

This Resolution comes in implementation of the provisions of the Unified Insurance Law No. 155 of 2024 and is in line with the Authority’s direction towards establishing proactive supervision and raising the efficiency of risk management in non-banking financial activities.

A Modern Regulatory Framework to Ensure Financial Stability

The new Resolution establishes a clear and updated regulatory framework for financial solvency margin requirements. This framework is designed to ensure that insurance and reinsurance companies maintain adequate capital levels to cover their future obligations, thereby supporting business continuity and protecting policyholders and beneficiaries.

Two Methodologies for Calculating Solvency Margin

The Resolution mandates distinct methodologies for calculating the solvency margin based on the type of insurance.

• For Property and Liability Insurance:

Companies must use two different calculation methods.

First : This is equivalent to 20% of net premiums, applicable until the end of the fiscal year ending in December 2027.

Second: This is based on net compensatory loadings.

To ensure an adequate solvency margin for all potential obligations and fluctuations—particularly in high-risk sectors like oil, aviation and energy – the Authority applies the higher value calculated from the two methods, in compliance with Egyptian Accounting Standard No. 50.

• For Life and Fund Accumulation Insurance:

The financial solvency margin is calculated based on the prescribed percentage of insurance capital for contracts, with the addition of technical provisions. Net liabilities are then deducted after accounting for the impact of reinsurance agreements, in line with the requirements of Egyptian Accounting Standard No. 50.

Enhancing Solvency and Asset Quality

The Regulations aim to strengthen the financial stability of insurance companies by enhancing the quality of assets considered for solvency margin calculations. The new rules specify that only the net values of assets on the balance sheet should be used. Several asset categories are explicitly excluded from this calculation, including certain investments, insurance contract assets and fixed assets. The Authority is also empowered to exclude any other assets it deems to lack sufficient guarantees, based on its technical inspection.

The excluded assets specifically include intangible assets, overdue customer balances and investments in subsidiaries that operate in the same insurance sector. Furthermore, the regulations prohibit the inclusion of technical provisions as assets. This measure is designed to ensure a more objective and accurate assessment of the company’s financial capacity to meet its obligations to policyholders.

Regulatory Powers to Address Declines in Solvency Margin

To ensure that companies adhere to the required solvency margin levels, without prejudice to Article 201 of the Unified Insurance Law, the Resolution grants the Authority effective regulatory powers in the event of a decline in the solvency margin below legal limits. These powers include compelling the company to prepare a recovery plan within a specified period, which may involve setting aside profits, increasing capital or obtaining conditional financial support from shareholders, thereby ensuring an immediate response to risks and addressing deficiencies before they escalate.

Commitment to International Standards and Updating the Regulatory Framework

This Resolution is part of the Authority’s ongoing efforts to develop the legislative and regulatory environment for the insurance sector, in line with international standards and practices and in a manner that is compatible with the nature and characteristics of the Egyptian market. The Authority affirms that the application of precise rules for the solvency margin will enhance stakeholder confidence, increase the efficiency of companies in facing crises and protect policyholders’ funds.

FRA affirms its continued commitment to develop and update the Egyptian insurance system by improving its supervisory and regulatory tools, enhancing disclosure and transparency and improving risk management, thereby achieving sustainable growth for this vital sector in supporting the national economy.