الهيئة العامة للرقابة المالية

• The new rules permit defined benefit (DB) funds to invest in mineral funds, venture capital and direct equity.
• Private insurance funds are now required to invest at least 5% of their total assets in open-ended equity funds listed on Egyptian Stock Exchanges.
• The maximum allocation for investments in shares traded on Egyptian Stock Exchanges is set at 15% of the fund’s total assets.
• Non-invested cash balances in the Fund’s current accounts must not exceed 5% of the total fund assets.
• The board of directors of defined contribution (DC) fund sets the Fund’s investment policy.
• Funds are obligated to submit quarterly reports to FRA detailing their investments and asset holdings.
• All private insurance funds have a six-month grace period to comply with the decree’s minimum standards

FRA Board of Directors has issued Decree No. 269 of 2024 regarding the rules, regulations, and investment ratios for private insurance funds. This decree, for the first time, allows Funds operating under the defined benefit (DB) scheme to diversify their investments into a wider range of channels. Additionally, the decree mandates that all Funds shall submit quarterly reports on their investments, as part of the ongoing efforts to regulate the market.

Private insurance funds are insurance systems registered with the Authority and hold independent legal personality. They are established to provide benefits to a group of employees who share a common connection. These benefits can take the form of insurance benefits, additional pensions, social benefits, or healthcare. The benefits provided by private insurance funds can be classified into insurance benefits, savings, additional pensions, social benefits or healthcare.

The decree stipulates that funds operating under the defined benefit (DB) scheme can invest their assets in various investment channels for the first time, with specific limits. These channels include minerals investment certificates or any other mineral-backed financial instruments traded on the Egyptian stock exchange, up to a maximum of 10% of the fund’s total assets or the issuance. However, the amount invested in a single investment fund certificate cannot exceed 5% of the fund’s total assets or 10% of the net asset value of the investment fund, whichever is lower.

The decree outlines specific investment guidelines for defined benefit schemes. Notably, it has mandated a minimum of 5% and a maximum of 20% of the fund’s total assets to be invested in open-ended equity funds listed on the Egyptian stock exchange. Additionally, the decree allows for a maximum of 15% of the fund’s total assets to be invested in shares traded on Egyptian stock exchanges.

Furthermore, the decree expands the investment scope for defined benefit funds to include venture capital funds and direct equity investments within Egypt, with a maximum allocation limit of 5% of the fund’s total assets.

In addition, the decree has granted the boards of directors of defined contribution (DC) funds the authority to determine the fund’s investment policy, either independently or through a contracted investment manager. However, it is mandatory to obtain prior approval from FRA before implementing any investment policy. Moreover, the policy must be presented to the fund’s sponsor (if any) for review before seeking FRA’s approval.

On the other hand , the investment policy must prioritize investment and savings vehicles that align with the unique needs and preferences of each member. Key considerations include age, expected membership duration and risk tolerance. Furthermore, the policy must incorporate relevant data and indicators while ensuring the fund’s actuarial soundness. The expected returns from investments and their suitability for fulfilling the fund’s obligations must be carefully assessed.

The board of directors of a defined contribution (DC) fund must establish clear procedures for members to participate in selecting investment or savings options. Members may adjust their selections during their membership, subject to the guidelines set by the fund’s board. Alternatively, members may authorize the fund’s board or sponsor (if applicable) to make investment decisions on their behalf.

In addition, the board of directors must ensure the development or acquisition of electronic systems that enable members and the fund’s sponsor to easily access their contribution balances and net investment returns. The fund may entrust the management of these systems to a contracted investment manager. Additionally, the fund may contract with an administrative services company to prepare and maintain data related to investment balances and returns.

Furthermore, the decree mandates that private insurance funds must ensure that their non-invested cash balances do not exceed 5% of their total assets. This limit may be temporarily increased for a maximum period of 30 days with the Authority’s approval, provided that there are due financial obligations or upcoming maturity of investments that need to be reinvested in accordance with the provisions of the said decree.

Additionally, all private insurance funds are required to submit quarterly reports to the Authority detailing their investments, particularly the balances held in banks, including cash deposits, certificates of deposit, and other investments. The reports must also include information on custodians holding the fund’s securities and investment management companies managing the fund’s portfolios. The Authority may require additional information regarding any other investment types not explicitly mentioned in the decree.

Private insurance funds must comply with minimum balance requirements within six months. Existing investments exceeding the new limits may be maintained, provided no further increases occur after the decrees’ effective date.

The decree aligns with the implementation of the Unified Insurance Law, which aims to expand insurance coverage to a wider segment of society. The law empowers the Board of Directors of the Authority to establish rules and regulations governing the insurance sector.

The Unified Insurance Law represents a significant milestone, consolidating four previously separate insurance laws into a single comprehensive framework. This step is a key component of the government’s strategy to regulate and digitize financial transactions, promoting the use of financial technology to increase the number of individuals benefiting from insurance coverage