الهيئة العامة للرقابة المالية

• Companies must allocate at least 5% of their free funds and 2.5% of paid-up capital to open-ended investment funds focused on Egyptian listed stocks.
• Up to 5% of the invested funds shall be allocated to commodity and metal funds.
• Life insurance companies can invest up to 10% of their invested funds in real estate investment funds, while property and liability insurers have a 5% limit.
• 5 new regulations for investments tied to unit-linked policies
• Investment rules have been established for contracts related to wealth accumulation plans

FRA Board of Directors issued decree No. 2 of 2025, establishing new rules, controls, and ratios for the investment of funds held by insurance and reinsurance companies.  This move reflects FRA’s commitment to create adaptable regulatory and legislative structures that empower these companies to deploy their capital across a wider range of investment avenues. The goal is to boost investment performance within the sector while simultaneously strengthening its financial resilience, all while adhering to sound principles of governance and risk management.

This decree follows a recent FRA decree requiring private insurance funds to allocate a portion of their assets to open-ended investment funds specializing in shares listed on Egyptian Stock Exchanges.  That earlier directive aimed to bolster the investment frameworks of these funds by tapping into the expertise of FRA-licensed fund managers.  It also sought to broaden the spectrum of investment choices available to private insurance funds, promoting diversification.

Decree No. 2 of 2025 applies comprehensively to all entities operating within the insurance and reinsurance landscape. This includes companies directly involved in insurance and reinsurance activities, as well as those providing Takaful insurance, specialized health insurance, micro-insurance and any other specialized form of insurance business as defined by the Unified Insurance Law No. 155 of 2024.

FRA has issued this decree to outline new investment requirements for insurance and reinsurance companies.  A core component of this decree mandates a minimum allocation of 5% of “free funds” to open-ended investment funds that invest in stocks listed on the Egyptian Exchange. Companies may also choose to directly invest in these listed stocks, and such investments can count towards the 5% requirement, contingent upon FRA approval.  To mitigate risk, the decree stipulates that investments in a single investment certificate or fund cannot exceed 5% of the company’s paid-up capital or 15% of the fund’s net asset value. For the purposes of this decree, “free funds” are defined as those funds corresponding to shareholder equity, while “allocated funds” are those specifically designated to meet the company’s obligations to policyholders and beneficiaries.

In addition to the requirements for free funds, FRA decree also sets a minimum investment threshold for “allocated funds.”  Companies must invest at least 2.5% of their paid-up capital in open-ended investment funds that focus on listed stocks. This requirement mirrors the restrictions placed on free funds, limiting investments in a single fund to 5% of paid-up capital or 15% of the fund’s net asset value, whichever is lower.

Direct investments in listed stocks can also satisfy this 2.5% requirement, again subject to FRA approval.  Crucially, the combined total of investments in stocks and open-ended investment funds cannot exceed 30% of the company’s total required allocated funds.

Furthermore, the decree imposes a 5% limit on investments in commodity and metal funds or any exchange-traded instruments backed by metals on EGX.

The new decree permits life insurance companies to allocate up to 10% of their invested funds to real estate investment funds, recognizing the long-term nature of their liabilities.  Property and liability insurance companies, with shorter-term obligations, are subject to a maximum allocation of 5%.  A key provision limits investments in any single real estate investment fund to 5% of the company’s total allocated funds or 15% of the fund’s net asset value.  This restriction aims to diversify risk and prevent overexposure to any one fund.  Importantly, these limitations do not apply to real estate investment funds that the insurance companies themselves sponsor or establish.

The decree also establishes crucial controls for the investment component of unit-linked policies, a first for the industry.  Insurance companies are now mandated to segregate the funds associated with these policies into independent accounts, managed through a dedicated electronic system.  Complementing this, companies must maintain a detailed, separate investment record for these segregated funds. This record must include, at a minimum, the policy number, customer name, invested amounts, specific investment instruments used, returns generated and any other data deemed necessary by FRA.

Additionally, Article 10 of the decree clarifies that the new regulations do not immediately invalidate pre-existing investment allocations, even if those allocations exceed the maximum limits stipulated in Article 8.  This provision acknowledges that companies may have existing investment strategies that need time to be adjusted.  However, these companies are required to bring their investment portfolios into full compliance with the minimum and maximum limits specified in Article 8 within six months of the decree’s effective date.

To ensure transparency, insurance companies must publish monthly performance data for unit-linked policies on their websites. This data includes return rates and unit prices, giving policyholders insight into their investment performance.  Furthermore, FRA has capped the fees and expenses associated with managing these investments. Investment manager charges, including all costs, fees, and other expenses, cannot exceed the limits outlined in FRA-approved insurance policy.

This move aligns with the provisions of Law No. 155 of 2024 which came into effect in July 2024, and reflects the continuous evolution of insurance and reinsurance operations.

It also incorporates a client needs assessment, considering factors such as age, financial status, investment goals, risk tolerance and the proportion of invested funds relative to total income or wealth.  This assessment will be conducted annually, at a minimum, with electronic systems developed to provide clients with detailed information on their invested amounts and any associated deductions.

Furthermore, investment rules have been established for contracts related to wealth accumulation plans.  Insurance companies are required to segregate the funds earmarked for these contracts into independent accounts for management and investment purposes.

The decree also mandates that all costs, commissions and other expenses incurred in managing these investments do not exceed the amounts specified in FRA-approved contracts.  The annual client assessment, encompassing age, financial status, investment goals and the ratio of invested funds to income or wealth is also a requirement in this context.

Also, the decree mandates that all relevant companies establish an investment policy approved by their board of directors and by the Sharia Supervisory Committee for Takaful insurance companies.  This policy must address acceptable risk levels, portfolio diversification appropriate to the company’s business nature to maximize expected returns within acceptable risk parameters, and the analysis of available and future investment alternatives and opportunities based on scientific methods used to identify, assess and measure risks and link them to required returns.

Regarding portfolio evaluation, the new regulations mandate clear mechanisms for assessing investment performance, regardless of whether the portfolio is managed internally or by an external firm.  Companies must establish relevant benchmarks to evaluate returns and implement stress testing and scenario analysis protocols to gauge the portfolio’s resilience against financial shocks and unexpected economic downturns. FRA’s decree also clarifies the specific roles and responsibilities of the board of directors, the investment committee and senior management in overseeing all investment activities. Furthermore, it outlines detailed procedures for measuring and evaluating performance, including the use of specific performance indicators tailored to each asset class within the portfolio.

FRA has mandated the implementation of comprehensive supervisory procedures and systems.  These systems must be designed to proactively prevent and detect any errors or negligence on the part of those managing the investment portfolio.  Critically, they must also address and mitigate potential conflicts of interest and prevent any actions that could harm the interests of policyholders and beneficiaries.  Companies are required to establish procedures for handling such conflicts. FRA emphasizes that companies are obligated to pursue the highest possible average returns consistent with the risk tolerance levels approved by their board of directors.  To maintain transparency, companies must submit their investment policy to FRA annually and whenever any amendments are made.

The decree underscores the importance of regular reporting and adherence to the highest standards of corporate governance.  Insurance companies are required to submit regular reports to FRA detailing their investment activities.

These measures reflect FRA’s ongoing commitment to build and maintain public trust in the insurance market.  The overall aim is to ensure that insurance company’ funds are managed prudently, striking a balance between maximizing investment returns and safeguarding policyholders.