{"id":25626881,"date":"2026-09-29T13:51:19","date_gmt":"2026-09-29T10:51:19","guid":{"rendered":"https:\/\/fra.gov.eg\/fra_news\/%d8%a7%d9%84%d8%b1%d9%82%d8%a7%d8%a8%d8%a9-%d8%a7%d9%84%d9%85%d8%a7%d9%84%d9%8a%d8%a9-%d8%aa%d8%b5%d8%af%d8%b1-%d8%aa%d8%ad%d8%af%d9%8a%d8%ab%d9%8b%d8%a7-%d8%b4%d8%a7%d9%85%d9%84%d9%8b%d8%a7\/"},"modified":"2026-10-01T13:16:21","modified_gmt":"2026-10-01T10:16:21","slug":"%d8%a7%d9%84%d8%b1%d9%82%d8%a7%d8%a8%d8%a9-%d8%a7%d9%84%d9%85%d8%a7%d9%84%d9%8a%d8%a9-%d8%aa%d8%b5%d8%af%d8%b1-%d8%aa%d8%ad%d8%af%d9%8a%d8%ab%d9%8b%d8%a7-%d8%b4%d8%a7%d9%85%d9%84%d9%8b%d8%a7","status":"publish","type":"fra_news","link":"https:\/\/fra.gov.eg\/en\/fra_news\/%d8%a7%d9%84%d8%b1%d9%82%d8%a7%d8%a8%d8%a9-%d8%a7%d9%84%d9%85%d8%a7%d9%84%d9%8a%d8%a9-%d8%aa%d8%b5%d8%af%d8%b1-%d8%aa%d8%ad%d8%af%d9%8a%d8%ab%d9%8b%d8%a7-%d8%b4%d8%a7%d9%85%d9%84%d9%8b%d8%a7\/","title":{"rendered":"FRA Issues Comprehensive Underwriting and Pricing Controls for Credit and Guarantee Insurance \u2013 Tuesday 29 September 2026"},"content":{"rendered":"<ul>\n<li><span style=\"color: #800000;\">Requiring a formal written underwriting policy: Backed by technical and actuarial methodologies to establish minimum pricing standards.<\/span><\/li>\n<li><span style=\"color: #800000;\">Creditworthiness assessment factors, model validation, price-adequacy testing and semi-annual stress tests.<\/span><\/li>\n<\/ul>\n<p><strong>Dr. Islam Azzam, \u00a0FRA Chairman:<\/strong><\/p>\n<ul>\n<li><span style=\"color: #800000;\">\u201cThis decision follows extensive technical dialogue; we are committed to continually upgrading sector regulations.&#8221;<\/span><\/li>\n<li><span style=\"color: #800000;\">&#8220;Safeguarding financial stability and strengthening risk management remain our top priorities.&#8221;<\/span><\/li>\n<li><span style=\"color: #800000;\">&#8220;Credit and guarantee insurance portfolios must be managed by qualified, experienced personnel.&#8221;<\/span><\/li>\n<\/ul>\n<p><strong>Dr. Tarek Seif, \u00a0FRA Vice Chairman:<\/strong><\/p>\n<ul>\n<li><span style=\"color: #800000;\">\u201cThe Insurance Federation is drafting standard terms and minimum thresholds for all credit and guarantee policies to streamline operations.\u201d<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p>Dr. Islam Azzam, FRA Chairman has issued a comprehensive decree updating underwriting and pricing controls for credit and guarantee insurance policies. The decision aims to upgrade underwriting, pricing, reinsurance and risk management standards across the insurance sector, ensuring the highest levels of financial discipline and stability in alignment with the complexity of sector risks.<\/p>\n<p>Decision No. 3132 of 2026 applies to property and liability insurance companies licensed to conduct credit and guarantee insurance, excluding commercial credit and guarantee insurance, whether domestic or export credit. The decision establishes clear requirements for mandatory risk retention and the participation of credit providers in the risks covered by insurance policies.<\/p>\n<p>Under the decree, the insured party or credit provider must retain at least 25% of the outstanding balance of the financed amount or credit facility insured at the time of the insured event. This retained percentage cannot be insured, redistributed, or transferred to third parties\u2014 directly or indirectly\u2014to prevent undermining its core risk-mitigation purpose. FRA also reserves the right to mandate higher retention rates for specific risk categories or portfolios based on loss ratios, default rates and concentration levels.<\/p>\n<p>Furthermore, the decree strictly prohibits side agreements between insurers, insured parties or credit providers\u2014whether through contracts, addendums, or unapproved arrangements\u2014that directly or indirectly alter coverage scopes, reduce retention percentages, or modify claim payout terms contrary to FRA-approved wordings. Any modifications are null and void unless processed through official product-approval channels.<\/p>\n<ul>\n<li><strong>Underwriting Policy Elements, Technical Methodology and Creditworthiness Assessment<\/strong><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p>Under the decree, insurers must establish a formal, Board-approved written underwriting policy for credit and guarantee insurance. This policy must set rigorous standards, including explicit criteria for risk acceptance and rejection, robust creditworthiness methodologies, mandatory retention ratios, required collateral and strict maximum exposure limits. Furthermore, companies must enforce stringent concentration limits across single obligors, connected groups, credit providers, economic sectors and financing types. To ensure sound governance, the framework must also integrate formal default monitoring, recovery and collection rules, comprehensive reinsurance policies, and early warning indicators tied to mandatory corrective actions whenever defined thresholds are breached.<\/p>\n<p>The new rules mandate that companies establish a technical and actuarial methodology to determine a minimum technical pricing floor for all credit and guarantee policies, guaranteeing that premiums adequately cover associated risks and operational costs. When establishing this minimum pricing floor, insurers must factor in default probability, exposure at default where applicable, recovery rates, coverage ratios, retention ratios, financing or facility duration, along with the nature and value of collateral. They must also account for risk and uncertainty margins, expenses, commissions, production costs and reinsurance costs.<\/p>\n<p>The decree strictly bans issuing or renewing any policy below this minimum technical price, while allowing companies to charge higher commercial rates based on internal policy.<\/p>\n<p>To accurately estimate default probabilities for individuals, legal entities and project finance, companies are required to factor in official credit scores issued by licensed credit bureaus as a baseline, alongside financial burden indicators such as debt-service-to-income ratios and other statistically or actuarially significant variables. Furthermore, companies must ensure continuous validation of the relationship between these variables and actual default rates using reliable data and practical experience.<\/p>\n<p>Meanwhile, companies must utilize risk-appropriate indicators to estimate default probabilities for legal entities and project finance, focusing specifically on credit ratings or scores, cash flows, liquidity and solvency metrics, debt-servicing capacity, collateral coverage ratios, and economic sector risk profiles.<\/p>\n<p>Furthermore, when reliable historical experience is available, companies are required to compare the risk cost derived from their pricing models against actual historical loss costs for similar risks or portfolios\u2014after standardizing the coverage basis and making necessary adjustments to ensure comparability. Insurers must also conduct annual back-testing and periodic model validation to verify the efficacy of their price-adequacy testing models and the accuracy of their projections.<\/p>\n<ul>\n<li><strong>Periodic Review and Internal Concentration Risk Limits<\/strong><\/li>\n<\/ul>\n<p>To ensure the stability of the methodologies and technical thresholds governing underwriting and pricing policies, the decree mandates that the company\u2019s Board of Directors annually approve an actuarial expert report. This report must detail the pricing methodology, minimum technical rate floors, underlying assumptions and parameters, calibration bases, and the results of model testing and validation.<\/p>\n<p>Companies must formally notify FRA with supporting documents and data before implementing these technical thresholds. Required disclosures include the minimum rate schedule categorized by product nature, credit tier levels, debt-burden brackets, collateral types, coverage ratios, retention percentages, financing durations, the actuarial report, calibration data and regulatory testing results.<\/p>\n<p>Companies are required to update and submit their technical studies and thresholds to FRA annually, or immediately upon any material change in loss patterns, default or recovery rates, underwriting policies, credit data sources, actuarial methods, or core modeling assumptions.<\/p>\n<p>Extending these governance requirements, companies must establish approved internal limits for concentration risk covering, at a minimum, single obligors, connected groups, credit providers, economic sectors, financing types, and reinsurers, while strictly complying with established regulatory controls and ratios.<\/p>\n<p>A company&#8217;s exposure to a single client or connected group cannot exceed 10% of the active or outstanding credit and guarantee insurance portfolio&#8217;s insured amounts, or the capital allocated to the branch&#8217;s liabilities, whichever is lower.<\/p>\n<p>Furthermore, business ceded to the company from a single credit provider cannot exceed 50% for banks and 30% for other credit providers relative to the branch&#8217;s total insured amounts, unless prior FRA approval is obtained.<\/p>\n<p>The volume of credit and guarantee insurance premiums must not exceed 25% of the company\u2019s total gross written premiums at year-end without prior approval from the FRA.<\/p>\n<p>FRA may approve exceptions to these thresholds based on a technical and actuarial study covering, at a minimum, the impact on solvency, stress test results, reinsurance quality, concentration levels, loss and default rates and the company&#8217;s capacity to absorb risk.<\/p>\n<p>To further mitigate risk concentration and ensure credit stability, the decree requires companies to ensure that their reinsurance program for the credit and guarantee portfolio is proportional to the nature and scale of risks assumed. When designing reinsurance programs and selecting reinsurers, companies must evaluate reinsurer solvency, credit ratings, exposure size, collectability of receivables, and concentration risks, while strictly preventing unjustified, material concentration with a single reinsurer.<\/p>\n<ul>\n<li><strong>Controls Reinforcing FRA\u2019s Commitment to Insurance Sector Growth<\/strong><\/li>\n<\/ul>\n<p>Highlighting the new regulations and their targeted impact on Egypt&#8217;s insurance market, Dr. Islam Azzam, FRA stated that the decree was issued following extensive community and technical dialogue with insurance and reinsurance companies. This demonstrates FRA&#8217;s commitment to continuously upgrading insurance regulations, safeguarding companies&#8217; financial stability, strengthening their capacity to navigate market risks, and enhancing technical and professional efficiency\u2014particularly since credit insurance plays a vital role in credit risk management.<\/p>\n<p>FRA Chairman added that the new controls feature detailed, clear and rigorous standards that fully align with the Unified Insurance Law No. (155) of 2024 and regulatory decisions issued over the past three years. They also adapt to economic shifts and sector developments by equipping the regulatory framework with enhanced tools to support operational efficiency.<\/p>\n<p>In this context, he pointed to the decree&#8217;s mandate requiring companies to conduct stress testing and scenario analysis for their credit and guarantee portfolios at least semi-annually, or whenever material shifts occur in risk size or nature. This is designed to monitor default, recovery, and loss rates, evaluate concentration spikes with single financing entities, and track the default or credit downgrades of key reinsurers\u2014thereby enabling FRA to mandate corrective action plans if portfolio deterioration indicators emerge.<\/p>\n<p>Dr. Islam Azzam stressed the obligation of companies to assign credit and guarantee portfolio management\u2014spanning underwriting, pricing, claims, and risk control\u2014to qualified professionals whose expertise matches the scale and complexity of the business. FRA plans to issue a follow-up directive detailing technical qualification standards, accompanied by secondary regulations defining key metrics such as loss ratios, net liabilities, connected groups, early warning thresholds, and actuarial baseline requirements.<\/p>\n<p>For his part, Dr. Tarek Seif, FRA Vice Chairman noted that the new regulations introduce critical advancements that balance insurance company portfolios, ensure early risk detection across all forms, drive continuous updates based on clear and FRA-approved technical foundations, and curb loss rates.<\/p>\n<p>He added that the Egyptian Insurance Federation will play a pivotal role in enforcing the decree by drafting standard terms and minimum thresholds for all credit and guarantee policies. This draft will outline baseline definitions, coverage scopes, retention percentages, exclusions, and claim payout conditions, and will be submitted to FRA for review and approval before implementation, thereby facilitating operations for companies to execute the new controls seamlessly.<\/p>\n<p>Regarding the requirement to perform I-Score checks prior to policy issuance or renewal and incorporate the results into risk pricing, Dr. Tarek Seif announced that FRA will release a follow-up directive. The forthcoming rules will define default parameters, debt restructuring, dispute mechanisms, data retention, and confidentiality, facilitating the real-time reporting of credit defaults and non-payments through a dedicated electronic platform.<\/p>\n<p>Companies are required to align their operations with the provisions of this decree within a 6-month grace period starting upon its upcoming publication in the Official Gazette. The decree&#8217;s provisions will apply to policies issued for the first time or renewed after the grace period expires, without compromising rights and obligations arising from pre-existing active policies.<\/p>\n<p>Clear standards and strict controls to enhance reinsurance and risk management policies.<\/p>\n","protected":false},"author":7,"featured_media":24833926,"parent":0,"template":"","format":"standard","categories":[],"tags":[5803,5802,5074,3791],"fra_news_taxonomy":[],"news_paper_taxonomy":[],"class_list":["post-25626881","fra_news","type-fra_news","status-publish","format-standard","has-post-thumbnail","hentry","tag-credit-and-guarantee-insurance-policies","tag-underwriting-and-pricing-controls","tag-dr-islam-azzam-fra-chairman","tag-financial-regulatory-authority-fra"],"_links":{"self":[{"href":"https:\/\/fra.gov.eg\/en\/wp-json\/wp\/v2\/fra_news\/25626881","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fra.gov.eg\/en\/wp-json\/wp\/v2\/fra_news"}],"about":[{"href":"https:\/\/fra.gov.eg\/en\/wp-json\/wp\/v2\/types\/fra_news"}],"author":[{"embeddable":true,"href":"https:\/\/fra.gov.eg\/en\/wp-json\/wp\/v2\/users\/7"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/fra.gov.eg\/en\/wp-json\/wp\/v2\/media\/24833926"}],"wp:attachment":[{"href":"https:\/\/fra.gov.eg\/en\/wp-json\/wp\/v2\/media?parent=25626881"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fra.gov.eg\/en\/wp-json\/wp\/v2\/categories?post=25626881"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fra.gov.eg\/en\/wp-json\/wp\/v2\/tags?post=25626881"},{"taxonomy":"fra_news_taxonomy","embeddable":true,"href":"https:\/\/fra.gov.eg\/en\/wp-json\/wp\/v2\/fra_news_taxonomy?post=25626881"},{"taxonomy":"news_paper_taxonomy","embeddable":true,"href":"https:\/\/fra.gov.eg\/en\/wp-json\/wp\/v2\/news_paper_taxonomy?post=25626881"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}