LICENSING AND SUPERVISION OF INSURANCE BUSINESS

INSURANCE CORPORATE GOVERNANCE

Whereas, prudent and effective corporate governance practices by insurance

companies are critical to the proper functioning of the insurance sector and the

economy as a whole;

Whereas, good corporate governance plays a vital role in maintaining the safety and

soundness of the financial system while also developing accountability regime that

allocates the powers and responsibilities of an insurance company among the board

and senior management;

Whereas, good corporate governance should lead to balanced risk-taking practices

that take into account the interests of key stakeholders;

Whereas, the National Bank of Ethiopia aims to ensure that insurers are soundly and

prudently managed and directed;

Now, therefore, in accordance with Article 14(1), Article 15(4/b-d & f/) and Article

64(2) of the Insurance Business Proclamation No. 746/2012 (as Amended by

Proclamation No. 1163/2019), the National Bank of Ethiopia has issued this Directive.

1. Short Title

This Directive may be cited as “Insurance Corporate Governance Directive No.

SIB// 2025”.

2. Definitions
For the purpose of this Directive, unless the context provides otherwise:

2.1. “board” means the board of directors that is the governing body of an

insurance company appointed by shareholders or other authorized body that

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 has primary accountability for the governance and performance of the

insurance company including strategy, overseeing management and

protection of the shareholder and stakeholder interests;

2.2. “board charter” means a document outlining the roles and responsibilities

of the board, powers of the board, various board committees and their roles,

separation of roles between the board and management and the policies and

practices of the board in respect to corporate governance matters;

2.3. “chief executive officer” means a person, by whatever title that person may

be referred to, who is primarily responsible for the day-to-day management

of the affairs of an insurance company;

2.4. “corporate governance” means the process and structure used to direct

and manage the business and affairs of an insurance company towards

enhancing business prosperity and corporate accountability with ultimate

objectives of realizing long-term shareholders’ value, as well as customer,

and other stakeholder interests;

2.5. “director” means any member of the board of an insurance company by

whatever title the person may be referred to;

2.6. “employee” means a chief executive officer, a senior executive officer or any

other person who is appointed or hired by an insurance company to carry

out its day-to-day operational activities;

2.7. “executive director” means a director who is actively involved in the day to

day management of the affairs of an insurance company;

2.8. “financial institution” means an insurance company, a bank, a

microfinance institution, a capital goods finance company, a reinsurer, a

micro-insurance provider, postal savings, money transfer institution, digital

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 finance service provider, or such other institution as determined by the

National Bank;

2.9. “first degree of consanguinity or affinity” means spouse, children and

parents;

2.10. “independent director” means a non-executive director that has no family

of first degree consanguinity relationship or business, professional or

commercial relationship with an insurance company, and is neither part of

senior management nor involved in the day-to-day operations of the

insurance company. An independent director is an experienced board

member that is not under any undue influence, internal or external, political

or ownership that would impede his/her ability to exercise objective

judgment.

Candidates who would not normally be considered to be an independent

director include natural persons who are:

2.10.1. a direct or indirect shareholder, a director, a chief

executive officer, or a senior executive officer of an

insurance company and/or the spouse or relative in the

first degree of consanguinity or affinity of such

shareholder, director, chief executive officer, or senior

executive officer;

2.10.2. a shareholder, director, chief executive officer, senior

executive officer of a company that has any contractual

obligation towards an insurance company;

2.10.3. involved, either directly or indirectly, in any legal

proceedings or out-of-court disputes against an insurance

company, the parent undertaking or their subsidiaries;

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 2.10.4.having any business, professional or commercial

relationship with an insurer over the past two years.

2.11 “influential shareholder” means a person who holds directly or indirectly two

percent or more of the total subscribed capital of an insurance company;

2.12 “National Bank” means the National Bank of Ethiopia;

2.13 ‘‘non-executive director” means is a director who is not involved in the day

to day management of an insurance company;

2.14 “non-influential shareholder” means any person who holds directly or

indirectly less than two percent of the total subscribed capital of an insurance

company;

2.15 “one term” means a period not exceeding three years;

2.16 “person” means any natural or juridical person;

2.17 “persons with significant influence” means influential shareholders,

directors, chief executive officer and senior executive officers of an

insurance company;

2.18 “related party” means:-

2.18.1 an influential shareholder, a director, a chief executive officer, or a

senior executive officer of an insurance company and/or the

spouse or relative in the first degree of consanguinity or affinity of

such shareholder, director, chief executive officer, or senior

executive officer, or

2.18.2. a partnership, an enterprise, a private limited company, a share

company, a joint venture, a corporation or any other business

organization or an entity in which influential shareholder, director,

chief executive officer, senior executive officer of an insurer

and/or his spouse or relative in the first degree of consanguinity

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 or affinity of such shareholder, director, chief executive officer,

senior executive officer:

a. owns 10% or more interest as shareholder, or

b. serves as director, chief executive officer, or senior

executive officer;

2.19 “related party transaction” means any transaction with related parties;

2.20 risk management function” means the business process that clearly

identifies and measures inherent and significant risks of an insurance

company and draws a strategy, policy and procedure to mitigate such

risks;

2.21 “senior executive officer” means any officer of an insurance company

by whatever title he may be referred to, who is deputy to the chief

executive Officer or who is directly accountable to the board;

2.22 “senior management” means the chief executive officer, senior

executive officers, and any other official, as may be defined by individual

insurance company responsible for day-to-day running of an insurance

company;

2.23 “minority shareholders” means a person or group of persons who

cannot exercise the powers of a company or control its affairs;

2.24 “sustainability” means to social and environmental sustainability, as well

as economic sustainability where it intersects with environmental and

social sustainability. Sustainability information is also referred to as non-

financial information; and

2.25 any expression in the masculine gender includes the feminine and/or

juridical persons.

3 Scope of Application

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 3.1 This Directive shall be applicable on all insurance companies operating in

Ethiopia and on an Ethiopian reinsurer.

3.2 In exceptional cases and with valid justification acceptable to the National

Bank, insurance companies may apply to the National Bank to defer the

application of certain provisions of this Directive.

3.1 Notwithstanding the provision of sub-article 3.1 of this Article, an insurance

company owned by the Government may apply Articles 7 and 9 in due

consideration of relevant laws.

4 General Principles

4.1 Effective corporate governance of an insurance company and the way they

conduct their business is critical to the proper functioning of the insurance

sector and the economy as a whole.

4.2 The primary objective of corporate governance is to develop an

accountability framework that allocates the powers and responsibilities by

which the business and affairs of an insurance company are carried out by

its board and senior management.

4.3 A secondary objective is also to safeguard stakeholders’ interest in

conformity with public interest on a sustainable basis.

4.4 Among stakeholders of an insurance company, policyholder’s interest takes

precedence over the interest of shareholders.

5 Corporate Culture and Values

5.1 An insurance company’s corporate governance framework shall institute a

corporate culture and a set of values around responsible and ethical

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 behavior, including risk culture, and legal and ethical conduct throughout

the insurance company.

5.2 Corporate culture and value shall be set by the board and senior

management and communicated to the rest of the organization, through

a code of conduct and code of ethics that clearly define acceptable

behavior.

5.3 Senior management shall institute a whistleblower policy and process

overseen by the board that allow employees to report unethical and

illegal issues confidentially without fear of reprisal and ensures that

material concerns are thoroughly addressed.

5.4 An insurance company shall commit at the highest level of the

organization to integrate sustainability factors in their risk management

processes and oversight, focusing both on financing activities and

operations.

5.5 An insurance company shall commit to long-term economic

development and the sustainability of its investment and operating

activities, in line with National Sustainable Development Goals.

6 Duties of Directors

Directors have a duty to:

6.1 act in good faith and with utmost commitment to promote the success of

the insurance company. In this regard, directors shall give due regard to

the long-term interests of the insurance company, the interests of the

insurance company’s employees, policyholders and creditors, and the

impact of the insurance company’s operations on the community and

the environment;

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6.2 exercise independent judgment in the exercise of their responsibilities, as

defined in the relevant law;

6.3 discharge their responsibility with care, skill and diligence, as defined in

the relevant law. Directors shall be liable for damages caused to an

insurance company and to its shareholders due to lack of care or

diligence on their part. Directors shall avoid the approval of any

transaction that is contrary to the insurance company’s own policies, the

regulatory requirements of the National Bank and other applicable laws;

6.4 comply with relevant laws and regulations, National Bank Directives, and

corporate values and policies of the insurance company;

6.5 address all issues and problems on a timely basis, and prevent illegal or

unethical actions such as bribery and corruption inside and outside the

insurance company;

6.6 disallow behaviors that could result in any improper or illegal activities in

the insurance company, such as money laundering, fraud, bribery or

corruption. The board shall also discourage excessive risk-taking

activities and self-dealing and acceptance of gifts or favors;

6.7 use their position, insurance company information and assets properly.

Directors shall not use their position, information acquired by virtue of

the position they hold, to obtain an advantage for themselves or

someone else. Directors shall not misuse the insurance company’s assets

except in accordance with the terms on which they are provided;

6.8 maintain the confidentiality of the insurance company’s and third party’s

information; confidential information received by a director in the course

of the exercise of their duties remains the property of the insurance

company and it is improper to disclose it, or allow it to be disclosed,

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 unless that disclosure is authorized by responsible organ of the

insurance company or permitted by other relevant laws. Directors shall

maintain appropriate level of confidentiality at all times with respect to

information or data pertaining to the insurance company’s customers,

suppliers and employees;

6.9 act fairly and impartially. Directors shall avoid bias, discrimination,

caprice or self-interest and shall demonstrate respect for others by

acting in a professional and courteous manner; and

6.10 act with honesty and integrity. Directors shall be truthful and transparent

in their dealings; use their power responsibly.

7 Board Size and Composition

minimum number of directors, due to the special nature of the

insurance companies , which gives them an added responsibility of

safeguarding the interests of policyholders, the National Bank requires

an insurance company, to have at least nine directors.

7.2 A board shall include directors who as a group provide a balance of skill,

diversity and expertise, which collectively possesses the necessary

qualification commensurate with the size, complexity and risk profile of

the insurance company. The mixtures of core competencies include

insurance, finance, accounting, management, economics, legal, business

administration, auditing, information technology, investment

management and sustainability. The qualifications and experience of all

board members shall at a minimum meet the requirements set by the

National Bank.

7.3 The board of an insurance company shall be composed as follows:

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 7.3.1 1/3rd of the directors shall be nominated and elected separately by

non-influential shareholders.

7.3.2 1/3rd of the directors shall be nominated and elected by all

shareholders; and

7.3.3 1/3rd of the directors shall be independent directors, nominated by

the existing board and elected by all shareholders.

7.4 Shareholders of an insurance company shall ensure that there is no

single gender representation in the board and that at least two (2)

females are elected to the board. The board shall enact a policy to

ensure the achievement of diversity in its composition. Diversity applies

to academic qualifications, technical expertise, relevant industry

knowledge, experience, and gender.

7.5 A maximum of two (2) employees of an insurance company may be

elected to the board of the insurance company. However, such

employees cannot be chairperson of the board.

7.6 In order to exercise its duties of monitoring and overseeing managerial

performance, preventing conflicts of interest and balancing competing

demands on the insurance company, it is essential that the board is able

to exercise objective judgment.

7.7 Notwithstanding the provision of the Commercial Code, the board of

directors shall have a chairperson and vice chairperson.

8 Conflict of Interest
8.1 The board shall put in place a policy to manage conflict of interest. The

insurance company shall maintain a register of declared conflict of interest.

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 8.2 The board chair, ahead of every board meeting, shall call up on all directors

to declare if there are any conflicts of interests related with the agenda items

being discussed.

8.3 A director of an insurance company shall avoid a situation in which he has a

direct or indirect interest that conflicts, or possibly may conflict, with the

interests of the insurance company, as described in relevant law.

8.4 A director shall inform the board of any situation that may involve a conflict

of interest between his own and the insurance company’s interest. Where a

director of an insurance company is in any way, directly or indirectly,

interested in a proposed transaction, contract entered into or any other

relationship with the insurance company, he shall declare the nature and

extent of that interest to the other directors. Declarations shall be made as

soon as the existence of a situation that could give rise to a conflict of

interest is known.

8.5 No insurance company’s director or employee may carry out any

transaction under conflict of interest.

9 Appointment of Directors
9.1 Directors shall be nominated and elected based on board appointment

policy and procedures of an insurance company, as approved by the

general shareholders meeting. Such policies and procedures shall

incorporate relevant provisions of this Directive related to board

appointment.

9.2 Whenever there is a board election, the general shareholders meeting shall

first appoint an ad hoc board nomination and election committee that is

responsible for the nomination and election of directors. A member of the

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 nomination and election committee shall not present himself as a candidate

for the election. The committee shall have five members which are neither

current directors nor employees of the insurance company. At least two of

the nomination and election committee members shall be non-influential

shareholders.

9.3 One month prior to the general shareholders’ meeting, the company

secretary of an insurance company shall publish the relevant fit and proper

criteria to shareholders through widely reaching media including

newspapers, insurance company’s website, broadcast and other electronic

channels as necessary,

9.4 An insurance company shall disclose and adequately inform its shareholders

about the procedures for the nomination of directors prior to the general

shareholders meeting.

9.5 The nomination and election committee shall receive nominations on the

spot. The committee shall ensure that the number of nominees is double

the size of the board.

9.6 All nominations shall include a brief description of the nominee’s professional

qualification and experience, and the name of the nominator.

9.7 A legal person may be elected as a director in line with the relevant

provisions of the Commercial Code. Where a person nominated is a legal

person, a natural person who is going to represent the legal person on the

board (the representative) shall be identified during the nomination process

to ensure that the person representing the shareholder fulfills the criteria

set by the National Bank for board membership.

9.8 All nominees must meet the qualifications and experience required by the

National Bank. The nomination and election committee shall adequately

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 brief the shareholders about board election criteria prior to the conduct of

board nomination process.

9.9 The nomination and remuneration committee of the board of director’s, in

due observance of related criteria, shall recruit and propose nominees,

whose number shall at least be twice the number of independent board

members to be elected. The board will hand over the list of the nominees for

independent directors to the nomination and election committee.

9.10 The nomination and election committee, shall receive and prepare three

categories of nominees, as per the following order:

9.10.1 List 1: Nominees for 1/3rd of the board seats reserved for election by

non- influential shareholders;

9.10.2 List 2: Nominees for 1/3rd of the board seats reserved for all

shareholders, for election by all shareholders.

9.10.3 List 3: Nominees for 1/3rd of the board seats reserved for

independent directors, for election by all shareholders.

9.11 The general meeting shall vote separately for each nominee, on each list.

Only non-influential shareholders may vote for the nominees in List 1. All

shareholders may vote for List 2 and List 3. The nominees with the largest

number of votes will be appointed. Nominees who were not successful shall

be included for each category on a waiting list for consideration for

appointment by the board in the event of future vacancies on the board.

9.12 If an insurance company has no influential shareholder, election for board

shall be conducted by all shareholders.

9.13 The board of a government-owned insurance company shall be appointed in

compliance with the relevant law under which they are governed.

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 9.14 Notwithstanding the provision of sub-article 9.13 of Article 9, board

appointed for a government-owned insurance company shall be presented

to the National Bank for conduct of fit and propriety assessment and

approval.

10 Conduct of Board Election by Authorized Bodies

10.1 Where the National Bank decides to conduct board election, the process

shall proceed in line with sub-articles 13 (1b) and (2) of the Insurance Business

Proclamation number 746/2012 (as Amended by Proclamation number

1163/2019).

10.2 Where a court of law, external auditors or any other organ authorized by law

orders to carry out or decides to conduct board election, the process shall

proceed in line with applicable laws.

11 Board of Directors

11.1 An insurance company shall be led by an effective and entrepreneurial

board, whose role is to promote the long-term sustainable success of the

insurance company, generating value for shareholders and contributing to

wider society.

11.2 The board shall ensure that the necessary resources, policies and practices

are in place for the insurance company to meet its objectives and measure

senior management’s performance against those objectives.

11.3 The board shall establish the insurance company’s values and strategy, and

ensure its alignment with its culture. A director shall act with integrity, lead

by example, and promote the desired culture.

11.4 Approval by National Bank and Term of Office

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11.4.1 Appointment of directors shall be subject to approval by the National

Bank in accordance with the requirement stipulated under the

Insurance Business Proclamation Article 15(2) and relevant National

Bank Directives.

11.4.2 An insurance company shall submit application and relevant documents

to the National Bank for approval of directors within 20 working days

from the date of their election.

11.4.3 The National Bank shall decide on the application for approval within 15

working days from the date of receipt of all documents as required

under sub-article 11.4.2 of this article.

11.4.4 The term of a board shall be counted from the date the ordinary general

meeting of shareholders elected the board. .

11.4.5 A person may not serve either on his own behalf or representing any

other shareholder as agent, or by whatsoever means, as a director of

the insurance company for more than six consecutive years. However,

he may be re-elected after a lapse of six consecutive years.

11.4.6 Notwithstanding sub-article 11.4.5 of this article, if the ordinary general

meeting of shareholders of an insurance company wishes to maintain

continuity in the board and re-elect some of the existing board

members, it may re-elect such directors, for only one more term. The

number of board members so re-elected shall, however, be limited to a

maximum of one-third of the board seats of the insurance company.

11.4.7 Where the surviving directors are less than half of the board, they shall

convene a general meeting to appoint other directors.

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11.4.8 The term of office of the outgoing directors of an insurance company

may not terminate until written approval for appointment of the

incoming directors is granted by the National Bank.

11.5 Training
11.5.1 An insurance company shall give training, at least once a year, to

directors on priority basis in areas of financial analysis, corporate

governance, applicable laws, regulations, directives, risk management

and internal control.

11.5.2 An insurance company shall provide formal induction program for new

directors within three months of their appointment.

11.5.3 An insurance company shall file certificate of training of each member

of the board to the National Bank for validation of its compliance with

sub article 11.5.1 of this Article.

11.6 Board Meetings

11.6.1 The board shall establish rules for conducting board meetings in a

board charter.

11.6.2 A board meeting shall be held at least once in a quarter on the date and

at the venue fixed in accordance with the rules for manner of

conducting board meetings.

11.6.3 The board may hold virtual meetings on an extraordinary basis, as long

as the rules and procedures are laid out in the board charter.

11.6.4 The board may invite senior officials or other staff that it deems

necessary to board meetings.

11.6.5 The board shall fix regular meeting days and venue. In all regular

meetings (excluding urgent meetings), the chairperson or the company

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 secretary shall serve formal notice of meeting to each director, together

with agenda items, at least seven days earlier than the meeting day.

11.6.6 Board members are expected to commit to their duties and to arrive for

board meetings fully prepared to discuss the agenda. Board members

shall attend in person at least seventy five percent (75%) of the board

meetings of an insurance company within a financial year.

11.6.7 The board is required to take action in cases where the condition in

sub-article 11.6.6 11.6.6 hereinabove is not met. Actions the board can

take include a recommendation to the shareholders meeting to remove

that director from the board.

11.6.8 The board shall ensure all minutes of its meetings are properly

recorded, signed, sequentially numbered, and safely kept along with

other relevant documents.

11.6.9 Board remuneration shall be paid to a director in proportion to his

attendance at board meetings during the year.

11.7 Board Responsibilities

The board of an insurance company has the ultimate responsibility for the

insurance company’s business strategy and financial soundness, key

personnel decisions, internal organization and governance structure and

practices, and risk management and compliance obligations. The board may

delegate some of its functions, though not its responsibilities, to board

committees, including the Audit Committee, the Risk Management and

Compliance Committee, and the Nomination and Remuneration Committee

and other committees as the case may be.

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Without prejudice to the duties and responsibilities stated in other applicable

laws, regulations, National Bank Directives, and memorandum of association,

as well as, resolutions of shareholders, the board of the insurance company

shall at least be responsible for:

11.7.1 approving the strategy of the insurance company, based on a

proposal from the chief executive officer;

11.7.2 approving the insurance company’s annual business plans and

budgets;

11.7.3 approving insurance company policies;

11.7.4 approving the risk appetite statement, based on the proposal of

the chief risk officer.

11.7.5 overseeing risk management and internal controls of the

insurance company, ensuring the establishment of an

appropriate risk management framework, and setting the risk

appetite of the insurance company.

11.7.6 proposing external auditors and their service fee to the general

meeting of shareholders for appointment, based on

recommendations from the Audit Committee;

11.7.7 selecting and appointing chief executive officer, and

overseeing his performance;

11.7.8 appointing senior executive officers recommended by

Nomination and Remuneration Committee;

11.7.9 ratifying the appointment of chief internal audit and chief risk

officers who are qualified and competent with integrity, to

administer the affairs of the insurance company effectively and

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 efficiently, or removing the same where they fail to be fit and

proper;

11.7.10 setting and actively overseeing a remuneration structure for the

chief executive officer and senior executive officers, based on

recommendations from the Nomination and Remuneration

Committee. The remuneration structure shall support sound

corporate governance, shall establish appropriate incentives

that are aligned with prudent risk taking and sustainability

goals, shall be consistent with the long-term interest and the

financial soundness of the insurance company, and shall be

effective in addressing misconduct that potentially result in

losses;

11.7.11 ensuring the operation of the insurance company is run

prudently, and in compliance with relevant laws, regulations,

policies, and procedures;

11.7.12 approving equity investment decisions or agreements related to

acquisition and disposal of fixed assets and technology which

have material nature, as may be defined in the internal policy of

the insurance company;

11.7.13 developing succession plans for Senior Management, with

support from the Nomination and Remuneration Committee;

11.7.14 establishing and ensuring effective functioning of various board

committees including, when applicable, Audit Committee, Risk

Management Committee and Nomination and Remuneration

Committee, which shall report their resolutions to the full

board;

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11.7.15 assessing annually the effectiveness of the board, its

committees, and individual directors in carrying out their

responsibilities and reporting the outcomes to the annual

ordinary general meeting of shareholders and the National

Bank;

11.7.16 ensuring the adequacy of capital, solvency and liquidity of the

insurance company on an-on-going basis.

11.7.17 preventing and managing conflicts of interest in the insurance

company by putting in place sound policies and implementing

them, where conflict of interest refers to a circumstance where

a person’s activities or interests are advanced at the expense of

the insurance company;

11.7.18 establishing clear policies for shareholder relations with the

insurance company and at least annually reviewing practices,

aimed at clearly communicating the goals, strategies and

achievements of the insurance company to the shareholders;

11.7.19 monitoring management performance by a performance

management system and setting key performance indicators,

including those mentioned in sub-article 11.7.18 of this this

article;

11.7.20 developing transparent policy, rules and procedure for board

nomination and election in consideration of industry standard

and requirements stipulated in this directive and submit to the

general meeting of shareholders for review and endorsement;

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11.7.21 establishing an appropriate risk governance framework that

includes well defined organizational responsibilities for risk

management, satisfying three lines of defense principles;

11.7.22 reviewing and approving lines of responsibilities, delegating

authorities, segregating duties and accountabilities for board

and senior management members;

11.7.23 reviewing and approving a code of conduct for the board and

senior management;

11.7.24 ensuring the establishment of a code of conduct for the

employees of the insurance company;

11.7.25 establishing a formal induction program and ensuring that

every in-coming board director is inducted and provided with

necessary orientation in the area of the insurance company’s

business.

11.7.26 reviewing level of implementation of the codes of conduct

through undertaking internal as well as external monitoring and

assessment , establishing and communicating corporate

culture and value, including staff training programs developed

to encourage implementation;

11.7.27 exercising oversight over the insurance company’s exposure

and response to sustainability-related risks and opportunities,

review policies, strategies, risk management, and targets set by

management, and assess the performance of the organization

against its targets;

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 11.7.28 clearly defining the roles and responsibilities of senior

management, for the management of sustainability-related

risks and opportunities;

11.7.29 ensuring that sustainability-related risks and opportunities are

integrated in internal controls and compliance, including risk

management and processes to ensure the integrity of reported

sustainability information;

11.7.30 ensuring an effective internal audit system, staffed with

qualified personnel to perform internal audit functions

(covering at least financial, operational, legal, technology and

management audit) is put in place;

11.7.31 ensuring that appropriate management information system is

established to produce accurate, complete, relevant and timely

information on the performance of the insurance company;

11.7.32 monitoring stakeholder engagement process and ensuring that

stakeholder concerns and expectations are integrated in the

insurance company’s strategy;

11.7.33 developing strategies and suitable policies to manage relations

with different stakeholder groups, including a program that

allows insurance company staff and other stakeholders to

report complaints (i.e., “Whistleblower” policy); and

11.7.34 adopting a clear governance framework for the insurance

company including units, branches, district /regional offices, or

other legal entities, and manage the risk associated with

complex or opaque organizational structures.

11.8 Board Charter and Description of Authority

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11.8.1 The board shall adopt a board charter that provides a formal

description of matters specifically reserved for its decision as

provided in the insurance company’s internal policy to ensure

that the direction and control of the insurance company is

firmly retained in its hands.

11.8.2 The description of matters referred to under sub-article 11.8.1 of

this Article shall at a minimum include the following matters

a) acquisitions and disposals of equity investment, fixed

assets and technology of material nature as may be

defined by the board;

b) authority level for core functions of the insurance

company; and

c) approval on corporate policies on all matters, at a

minimum:

i. Board Charter;

ii. Committee Charters;

iii. Strategy;

iv. Compliance control policy;

v. credit policy;

vi. conflict of interest management;

vii. human resource management;

viii. investment;

ix. domestic and foreign banking operations;

x. liquidity management;

xi. internal audit/control;

xii. management information system/MIS;

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 xiii. planning and budgeting;

xiv. finance;

xv. risk management;

xvi. fixed assets;

xvii. corporate governance;

xviii. detection and prevention of criminal activities including

AML/CFT;

xix. outsourcing;

xx. disclosure policy;

xxi. communication;

xxii. procurement; and

xxiii. fraud monitoring.

11.9 Board Succession Planning and Exit of Board Members

11.9.1 The term of office of the directors shall be organized in a

manner that ensures a smooth transition.

11.9.2 The term of office of the members of the board shall be

organized in such a manner that they end at different times.

This ensures retention of institutional memory and makes it

easier to induct new board members. Where possible, no more

than one third of the board members shall retire at the same

time.

11.10 Exit Report

11.10.1 At the end of their office term, the outgoing board members shall

prepare a comprehensive exit report and submit to the National

Bank and company secretary of the insurance company, at the

latest fifteen (15) calendar days before conducting general meeting

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 of shareholders. The exit report shall at a minimum cover the

board’s performance during its office term, challenges, issues

requiring the attention of the National Bank and/or the incoming

new board and the way forward.

11.10.2 The insurance company shall not pay board remuneration for final

service year to outgoing board members if the board fails to

comply with the requirement set under 11.10.1 herein above.

11.11 Role of Board Chairperson

11.11.1 The chairperson leads the board and is responsible for its

overall effectiveness in directing the insurance company. The

chairperson shall demonstrate objective judgment and

encourage and promote critical discussion and a culture of

openness and debate, ensuring that dissenting view can be

freely expressed. In addition, the chairperson shall ensure that

directors receive accurate, timely and clear information, so that

decisions can be taken on a sound and well-informed basis.

11.11.2 Board Chairperson’s responsibilities are:

a) providing effective leadership to the board by setting the tone

and agenda, while guiding discussions in meetings;

b) ensuring that the board operates within legal and ethical

guidelines that all board members are heard and participate in

the discussion, and policies and procedures are followed;

c) facilitating board meetings, ensuring all agenda items are

covered, discussions are productive, and decisions are made

in a timely manner;

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 d) serving as a primary liaison between the board, management,

and shareholders, communicating important information and

decisions;

e) collaborating with other board members and management in

setting the organization's strategic direction and goals;

f) overseeing the annual board evaluation, as well as the

performance evaluations of senior management;

g) fostering positive relationships with key stakeholders, including

shareholders, employees, customers, and the community; and

h) ensuring that board charter is in place to govern the board’s

operation and conduct.

12 Company Secretary

12.1 Each insurance company shall have company secretary, in line with the

requirements of relevant law. The appointment and dismissal of the

secretary shall be approved by the board.

12.2 The secretary shall be accountable to the chief executive officer.

12.3 The secretary shall have the following powers and duties:

12.3.1 and keep information and records of the company;

12.3.2 provide reports and other necessary information promptly to

concerned body;

12.3.3 provide information to shareholders and to third parties;.

12.3.4 organize meeting of shareholders and members of the board of

directors;

12.3.5 prepare organize and keep minutes; and

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 12.3.6 carryout other tasks assigned to him by the CEO and the

memorandum of association..

12.4 Notwithstanding an agreement to the contrary, the secretary shall be liable

to the insurance company, shareholders or third parties for any breaches of

his duties under the Commercial Code or the memorandum of association.

13 Audit Committee

13.1 All insurance companies shall establish a board Audit Committee .

13.2 The objective of the Audit Committee is to provide independent oversight of

the insurance company’s financial reporting and internal control system and

ensure checks and balances within the insurance company.

13.3 The Audit Committee shall comprise of at least three directors. All members

of the Committee shall be non-employees, and at least one of its members

shall be an independent director. The chairperson of the Committee shall be

preferably an independent director, and not the chairperson of the board or

of any other committee.

13.4 The Audit Committee shall possess a collective balance of skills and expert

knowledge. At least two members shall have experience in audit practices,

financial reporting, and accounting. All members shall have the ability to

understand financial statements and education in accounting or finance.

13.5 A former partner or director of an insurance company’s existing auditing

firm shall not act as a member of the Audit Committee, within a period of

twelve months after ceasing to be a partner of the audit firm, or for as long

as he has any financial interest in the audit firm.

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13.6 The Audit Committee shall have an explicit authority to investigate any

matter within its terms of reference, full access to and co-operation by

senior management and shall have full discretion to invite any director or

executive officer to attend its meetings. The Audit committee shall have

reasonable resources to enable it discharge its functions properly. The Audit

Committee shall have full and unrestricted access to information and

unfettered access to senior management, to the internal audit and risk

management functions. The Audit Committee shall be able to obtain

independent professional advice.

13.7 The Audit Committee shall develop a committee charter, for approval by the

full board, laying out its composition, roles and responsibilities, and meeting

requirements.

13.8 The Audit Committee shall hold regular meetings, at least once every

quarter and shall report regularly to the full board.

13.9 The Audit Committee shall be responsible for the oversight of :

13.9.1 the financial reporting process that includes:

a. ensuring fair and transparent financial reporting, and prompt

publication of the financial accounts;

b. recommending approval by the board of the insurance

company’s policies on accounting policy and financial

reporting;

c. overseeing the financial reporting process; and

d. approving financial statements prior to their submission to the

full board.

13.9.2 the External Audit Process which includes:

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 a. recommending to the board for its approval of the

appointment, remuneration and dismissal of external auditors;

b. reviewing and approving the audit scope and frequency;

c. receiving key audit reports and ensure that senior

management is taking necessary corrective actions in a

timely manner to address control weaknesses, non-

compliance with policies, laws and regulations, and other

problems identified by auditors and other control functions;

d. ensuring adequate functioning, independence and effective

cooperation of internal and external audits; and

e. reviewing any non-audit services provided by the external

auditor, seeking to maintain the objectivity of the external

auditor and avoid conflicts of interest.

13.9.3 non-financial reporting and assurance that includes:

a. ensuring fair and transparent reporting of material

sustainability information;

b. ensuring fair and transparent reporting of performance audit

information; and

c. overseeing the process of seeking independent, external

assurance of non-financial information.

13.9.4 the Internal Audit Function

a. overseeing the functions of the Internal Audit Unit;

b. approving the annual internal audit plan;

c. ensuring full coverage of the insurance company's activities by

internal controls and internal or external audits;

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d. ensuring that all the insurance company's activities are audited

by the internal audit in a cycle whose duration shall not exceed

three years and must be adjusted depending on the risk profile;

e. assessing the adequacy of human, information technology

and other resources allocated to the internal control function;

f. ensuring that the internal controllers and auditors have the

necessary skills, and proposing measures to strengthen their

expertise and qualifications as necessary;

g. verifying the reliability and accuracy of financial information

intended for the board, the National Bank and third parties,

and assess the relevance of the accounting methods adopted

for the preparation of the individual and consolidated

accounts;

h. assessing the relevance of the corrective measures taken or

proposed to remedy the shortcomings or insufficiencies

detected in the processing of transactions, following control or

audit reports, or even, if applicable, in the internal control

system;

i. ensuring the effective and rapid implementation of the

corrective measures recommended by the control and audit

functions and, if necessary, alert the board, or the National

Bank directly in the event of non-implementation; and

j. assessing whether existing policies, processes and internal

controls (including risk management, compliance, Shari’ah

compliance and corporate governance processes) are

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 effective, appropriate and remain sufficient for takaful

business.

14. Internal Audit Function

internal audit program, internal audit findings and recommend actions to

be taken by management,

14.2 The head of internal audit function is appointed or removed by the board

on the recommendation of the Audit Committee. The remuneration shall

be determined independently of any business line overseen, and

performance measures shall be based principally on the achievement of its

own objectives to ensure independence.

14.3 Any measure of dismissal or transfer of the head of internal audit

can only take place after informing the National Bank, with a

supporting file that shows the reasons for the decision. The

revocation can only take place by the board, after obtaining assent

of the Audit Committee. The head of internal audit cannot be

dismissed if he has exercised his functions in good faith. An abusive

revocation measure taken without respecting the provisions of this

article will be subject to the sanctions.

14.4 The internal audit function shall review material related party

transactions and express its reasoned (non-binding) opinion on

related party transactions, including the insurance company’s

interest in entering into the transaction, and the convenience and

substantial correctness of its underlying terms.

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15 Risk Management and Compliance

15.1 Governance of risk management

15.1.1 An insurance company shall follow the three lines of defense

model and assign responsibilities for risk management at key

levels of the organization, including in the business units, as

part of a dedicated risk management function and an

independent internal audit function.

15.1.2 An insurance company shall have a dedicated risk

management unit overseen by a chief risk officer. The chief risk

officer shall be independent from the individual business lines

and have direct and unimpeded access to the insurance

company’s board and in particular to the Risk Management

and Compliance Committee.

15.1.2.1 The chief risk officer is responsible for supporting the

committee (and the full board) in its engagement with

and oversight of the development of the insurance

company’s risk appetite and risk appetite statement

(RAS) and for translating the risk appetite into a risk

limits structure.

15.1.2.2 The chief risk officer shall report and have direct

access to the board or Risk Management and

Compliance Committee without impediment. The chief

risk officer shall have the ability to meet with the board

or Risk Management and Compliance Committee in

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 the absence of other executive directors and senior

management members.

15.1.2.3 The appointment, dismissal, and other changes to the

chief risk officer or its equivalent position shall be

approved by the board.. The insurance company shall

discuss the reasons for such removal with the National

Bank.

15.1.2.4 The chief risk officer’s performance, compensation

and budget shall be reviewed and approved by the

Risk Management and Compliance Committee. The

compensation shall be determined independently of

any business line overseen, and performance

measures shall be based principally on the

achievement of its own objectives so as not to

compromise the independence.

15.1.2.5 Appointment of chief risk officer is subject to the prior

approval of the National Bank.

15.1.3 An insurance company shall integrate sustainability in the overall risk

management and control framework, including risk appetite and

tolerance, and the three-line-of-defense model, and evaluate the

impact of sustainability on their risk profile and capital adequacy,

solvency and liquidity positions. This includes assessing the impact of

sustainability on inherent risks, including credit, liquidity, market, and

operational risks.

15.1.4 An insurance company shall analyze the risk to its loan portfolio

presented by climate change, natural resource constraints, human

33
 rights concerns, or other broad sustainability trends, and assess the

concentration of sustainability-related risks in specific industry and

geography, including sectors vulnerable to climate transition risk and

physical risk for climate adaptation.

15.2 Risk Management and Compliance Committee

The Board Risk Management and Compliance Committee of an insurance

company shall:

15.2.1 be responsible for oversight of the strategies for capital and liquidity

management, as well as for all relevant risks of the insurance

company, such as credit, market, operational and reputational risks to

ensure they are consistent with the stated risk appetite.

15.2.2 develop a committee charter, for approval by the full board, laying out

its composition, roles and responsibilities, and meeting requirements.

15.2.3 hold regular meetings, at least once every quarter and shall report

regularly to the full board.

15.2.4 comprise at least three directors. The Chairperson of the Committee

shall be preferably independent, and not the chairperson of the board

or any other committee. The Committee shall include members who

have experience in risk management issues and practices.

15.2.5 receive regular reporting and communication from the chief risk

officer and other relevant functions about the insurance company’s

current risk profile, current state of the risk culture, utilization against

the established risk appetite, and limits, limit breaches and mitigation

plans.

15.2.6 have effective communication and coordination with the Audit

Committee to facilitate the exchange of information and effective

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 coverage of all risks, including emerging risks, and any needed

adjustments to the risk governance framework of the insurance

company.

15.2.7 be responsible at least for:

15.2.7.1 reviewing and recommending risk management strategies,

policies, risk appetite statements, and risk tolerance limits for

board’s approval;

15.2.7.2 reviewing and assessing adequacy of risk management

policies and framework in identifying, measuring, monitoring

and controlling risk, as well as, the extent to which these are

operating effectively;

15.2.7.3 ensuring infrastructure, resources and systems are in place

for risk management;

15.2.7.4 ensuring the staff responsible for implementing risk

management systems perform those duties independently of

the insurance company’s risk-taking activities;

15.2.7.5 reviewing management’s periodic reports on risk exposure,

risk portfolio composition and risk management activities;

15.2.7.6 periodically reviewing the effectiveness of internal controls

and risk management processes;

15.2.7.7 assessing the quality of the internal control system, in

particular the consistency of the risk measurement,

monitoring and control systems and propose, where

appropriate, reinforcement actions in this regard; and

15.2.7.8 checking compliance with the policies and rules of the

insurance company and with relevant proclamations,

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 regulations, directives and guidelines of the National Bank

and other relevant laws.

16 Nomination and Remuneration Committee

16.1 The primary objectives of Nomination and Remuneration Committee are to:
16.1.1 identify and nominate candidates for independent members of
the board of directors, for election by the general shareholders
meeting;
16.1.2 nominate candidates for the chief and senior executive officer

positions, for approval by the full board;

16.1.3 provide a formal and transparent proposal on the employment

and removal of the chief executive officer and senior executive

officers if they are ineffective, errant or negligent in discharging

their responsibilities;

16.1.4 make recommendations on the compensation/benefit systems

of the insurance company;

16.1.5 oversee human resource policy; human resource strategy and

employee performance management processes ;

16.1.6 oversee training programs for members of the board; and

16.1.7 review and endorse succession plans prepared by the

management of the insurance company.

16.2 The Committee shall strive to ensure remuneration is appropriate and

consistent with the insurance company’s culture and value, including the

risk culture, ethical conduct, long-term business success and sustainability.

16.3 The Committee shall comprise at least four directors.

16.4 The Committee is responsible at least for the following:

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16.4.1 prepare a profile of the ideal independent board, based on

discussions with the full board, and use the profile as a basis

for the recruitment of good candidates;

16.4.2 recruit independent directors to serve on the board, with the

assistance of recruitment consultants as necessary. Following

deliberations, the Committee will forward its proposed

candidates to the board of directors for further review and

presentation to the general meeting. All independent directors

nominated shall meet or exceed the National Bank’s fit and

proper requirements;

16.4.3 lead the process of nominating candidates to serve as senior

managers, for appointment by the board. The Committee will

recruit candidates for open positions, with the assistance of

recruitment consultants as necessary. Following deliberations,

the Committee will forward a “short list” of proposed

candidates to the board;

16.4.4 at the request of the board chairperson , and after detailed

review, provide a formal and transparent proposal on the

employment and removal of senior management members if

they are ineffective, errant and/or negligent in discharging their

responsibilities, for decision by the full board;

16.4.5 monitor the insurance company’s compensation and benefits

practices, and periodically benchmark these practices against a

set of peer institutions, in cooperation with the insurance

company’s human resources department. The Committee will

periodically make recommendations on the

37
 compensation/benefit systems of the insurance company, for

decision by the full board. The Committee will also periodically

review other human resource policies of the insurance

company, as requested by the board; and

16.4.6 develop training programs for board members. The

Committee shall review the effectiveness of these programs

and make changes as necessary.

16.5 The Committee shall hold regular meetings, at least once every three

months or as necessary, and shall report regularly to the full board.

17. Senior Management

17.1 Under the direction and oversight of the board, senior management shall

carry out and manage the insurance company’s activities in a manner

consistent with the business strategy, risk appetite, remuneration and other

policies approved by the board.

17.2 Senior management consists of a core group of individuals responsible and

accountable to the board for the sound and prudent day-to-day

management of the insurance company.

17.3 Senior management shall provide the board with any information the board

or its committees deem necessary to properly carry out their tasks and

responsibilities.

17.4 The organization, procedures and decision-making of senior management

shall be clear and transparent and designed to promote effective

management of the insurance company. This includes clarity on the role,

power, and responsibility of the various positions within senior management,

including that of the chief executive officer.

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17.5 The insurance company may form an executive committee, consisting of the

chief executive officer and senior executive officers. The composition, role,

responsibilities, and meeting procedures shall be established by a separate

charter.

17.6 Members of senior management shall have the necessary experience,

competencies and integrity to manage the businesses and the people under

their supervision. They shall receive access to regular training to maintain

and enhance their competencies and stay up to date on developments

relevant to their areas of responsibility.

17.7 The Board Charter shall clearly establish which senior management

positions require board approval.

17.8 Members of senior management shall be selected through an appropriate

promotion or recruitment process, which considers the qualifications

required for the position in question. For those senior management positions

for which the board is required to review or select candidates through an

interview process, senior management shall provide sufficient information to

the board.

17.9 Senior management contributes substantially to an insurance company’s

sound corporate governance by setting appropriate ethical and professional

standards, the “tone at the top”. Members of senior management shall

provide adequate oversight of those they manage and ensure the insurance

company’s activities are consistent with all applicable laws, the business

strategy, risk appetite and the policies approved by the board.

17.10 Senior management shall include consideration of sustainability risks and

opportunities in strategic objectives, focusing on sustainability impacts, risks

39
 and opportunities in underwriting and investments activities, as well as in

operations.

17.11 Senior management shall establish policies, procedures, and targets to

identify and manage climate, nature, labor, community, and other

sustainability-related risks in its underwriting and investment operations and

that these are integrated in the existing insurance risk management

framework.

17.12 Senior management is responsible for delegating duties to staff and shall

establish a management structure that promotes accountability and

transparency throughout the insurance company.

17.13 Senior management shall be responsible to establish and implement

management level committees as need be.

17.14 Senior management shall recognize and respect the independent duties of

the risk management, compliance and internal audit functions and shall not

interfere in their exercise of such duties.

17.15 Senior management shall provide the board with the information it needs to

carry out its responsibilities, supervise senior management and assess the

quality of senior management’s performance. In this regard, senior

management shall keep the board regularly and adequately informed of

material matters, including:

17.15.1 changes in business strategy, risk strategy/risk appetite;

17.15.2 the insurance company’s performance and financial condition;

17.15.3 breaches of risk limits or compliance rules;

17.15.4 internal control failures;

17.15.5 legal or regulatory concerns; and

40
 17.15.6 issues raised as a result of the insurance company’s

whistleblowing procedures.

17.16 Without prejudice to the duties and responsibilities stated in any applicable

laws, regulations, the National Bank Directives, and memorandum of

association of the insurance company, a chief executive officer shall at least

be responsible for:

17.16.1 developing corporate strategies, policies, business plans and

budgets which are subject to approval by the board before

implementation;

17.16.2 developing, approving and implementing procedure manuals,

guidelines and controls to address compliance with laws and

regulations applicable to the insurance company’s business

environment and risk profile;

17.16.3 ensuring documents indicated under sub-article 18.16.1 and

17.16.2 of this article are communicated to all concerned staff;

17.16.4 preparing an organizational structure that clearly and

appropriately assigns duties, responsibilities and authorities,

and ensures segregation of duties, which shall be subject to

board approval;

17.16.5 selecting and presenting all senior executive officers except

chief internal audit and chief risk management &/or compliance

officer for Nomination and Remuneration Committee which

shall be subject to board approval;

17.16.6 allocating authorities, duties and responsibilities ;

17.16.7 developing management information system that adequately

addresses the insurance company’s business environment and

41
 risk profile, getting approval from the board and implementing

it;

17.16.8 providing the board with timely, relevant, accurate and

complete reports on the plan performance;

17.16.9 implementing an effective internal control system and risk

management program of the insurance company;

17.16.10 implementing timely corrective action on deficiencies and

issues that have been raised or reported by the National Bank,

external and internal auditors and risk and compliance

managers; and

17.16.11 implementing the resolutions of the board.

18 General Meeting of Shareholders

18.1 Without prejudice to provisions provided in the Commercial Code of

Ethiopia, the ordinary general meeting of shareholders of an insurance

company shall:

18.1.1 strive in a good faith that only competent and reliable persons who

meet the requirements of the National Bank, and can enrich good

corporate governance and add value to the insurance company, are

elected or appointed as a director;

18.1.2 decide upon the appointment and service fee of an external auditor

as proposed by the Audit Committee and the board and this power

shall not be delegated to any other organ or body in the insurance

company’s structure;

18.1.3 ensure the board is held accountable and responsible for the

inefficient and ineffective governance;

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 18.2 Representation by a voter in person and by proxy in any shareholders

meeting shall be limited to the aggregate, including the voter’s own shares,

of a maximum of 10% of the total subscribed capital of an insurance

company.

18.3 A sitting board member or any employee of an insurance company shall not

represent and be proxy of any other shareholder in any shareholders

meeting of the insurance company.

18.4 A shareholder shall be eligible candidate for board election after a lapse of

at least two consecutive years once his name was entered in the share

register.

19 Disclosure
19.1 An insurance company shall be transparent to any shareholders,

policyholders and other relevant stakeholders without breaching the law of

the country and the National Bank Directives.

19.2 Without prejudice to provisions in other laws and National Bank Directives,

an insurance company shall at a minimum disclose the following to the

National Bank:

19.2.1 any related party transactions relating to an insurance

company’s fixed assets, and technology transactions of

material nature, as defined by the board, within fifteen working

days from the date of the transaction specifying the name, type

of transaction and amount involved;

19.2.2 report the status of the transactions stated under sub-article

19.2.1, at least once in a month; through attestation by the

board that such transactions have been carried out at an

43
 arm’s-length in compliance with the regulatory requirements,

the insurance company’s own policies and procedures; and

19.2.3 key points concerning risk exposures and risk management

strategy.

19.3 Without prejudice to provisions in other laws and the National Bank

Directives, an insurance company shall make public, timely and accurate

disclosure on all material matters regarding the company, including the

financial situation, performance, sustainability, ownership, and governance

of the company.

19.4 Disclosure shall be done in a timely fashion through a public website, annual

and periodic financial reports, and through other appropriate

mechanisms. Public disclosure shall include an annual report to

shareholders with the following information:

19.4.1 strategic objectives of the company;

19.4.2 risks factors;

19.4.3 narrative report summarizing the insurance company’s results

for the past year;

19.4.4 the three most recent available set of audited financial

statements, including statements of financial position,

statement of comprehensive income and expense accounts

together with auditors’ report;

19.4.5 external audit by independent, competent and qualified

auditor;

19.4.6 a corporate governance report, indicating:

a) board members, including their qualification, experience and

membership on board committees, and whether or not the

44
 insurance company considers each director to be

independent;

b) the approach used for the selection of board member for

ensuring an appropriate diversity of skill, background, and

viewpoints;

c) role and activity/performance of the board;

d) evaluation of the board;

e) the insurance company’s basic organizational structure,

including line business structure;

f) the insurance company’s memorandum of association;

g) capital structure and ownership including major share

ownership and voting rights, group structures and their

control arrangements; and

h) risk management process, including risk appetite, control

and audit;

19.4.7 Compensation of members of the board, the chief and senior

executive officers including policy and criteria, performance-

based compensation and risk adjustment; and aggregate total

compensation;

i) related party transactions;

19.5 An insurance company shall exhibit at every one of its places of business,

including its branches, in a conspicuous place throughout the year, covering

at a minimum a copy of its latest audited statement of financial position, a

comprehensive income and expense report and cash flow analysis in

respect of all its operations during the period.

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 19.6 The exhibition and publishing of the annual report pursuant to sub-articles

19.3 and 19.4 of this article shall occur within two weeks after the annual

shareholders meeting.

20 Supervision

20.1 The National Bank shall supervise corporate governance of insurance

companies, including through comprehensive evaluations and regular

interaction with board and senior management, and will suggest remedial

action as necessary.

20.2 The National Bank shall assess each insurance company’s corporate

governance performance, especially with respect to the risk culture of the

insurance company. This includes a consideration of the behavioral dynamic

of the board and senior management, including the “tone at the top” and

the cultural values of the insurance company are communicated and put

into practice, how information flows to and from the board and senior

management, and how potential serious problems are identified and

addressed throughout the company.

20.3 The National Bank will interact regularly with the board, individual board

members, senior managers and those responsible for the risk management,

compliance, and internal audit functions. The purpose of the interactions is

to support timely and open dialogue between the insurance company and

supervisors.

20.4 The board is responsible for:

20.4.1 ensuring National Bank’s examination report is considered as

confidential by the directors and/or employees of the insurance

company;

46
 20.4.2 ensuring appropriate and timely actions are taken to address

the regulatory and supervisory concerns and instructions of the

National Bank; and

20.4.3 following up the implementation of findings and

recommendations of on-site examination and off-site

surveillance reports of the National Bank, the external auditor,

and the internal control functions.

21. Penalties

21.1 Without prejudice to Article 18(1)of Proclamation Number 746/2012 (as

Amended by Proclamation 1163/2019), a director who in any matter

transacts or causes to be transacted or an influential shareholder for whom

a transaction is concluded in contravention of sub-article 8.5 of Article 8,

depending on the gravity of the violation, shall be:

21.1.1 suspended or removed from his seat on the board for at least three

(3) consecutive years effective from the date of identification of the

violation;

21.1.2 prohibited from investing in new shares or from buying existing

shares in any financial institution for three consecutive years

effective from the date of identification of the violation; and

22.1.3 subjected to any other appropriate administrative action the

National Bank deems necessary.

21.2 Without prejudice to article 17(1) of Proclamation No. 746/2012 (as

Amended by Proclamation No. 1163/2019), the National Bank, depending

on the degree or frequency of incompliance, may suspend or remove

chief executive officer or senior executive officer who in any matter

47
 transacts or causes to be transacted in contravention of sub-article 8.5 of

this Directive.

22. Applicability of Other Laws

22.1 Nothing in this Directive shall be construed to relieve an insurance company

or any other pertinent person from complying with the provisions of the

Commercial Code of Ethiopia, Public Enterprises Proclamation or any other

relevant laws.

22.2 No Directive or established practice may, in so far as it is inconsistent with

the provisions of this Directive, have effect with respect to matters provided

by this Directive.

23. Transitional Provision

An insurance company shall apply provisions related to the nomination and

election of boards of directors after expiry of the terms of the existing boards.

24. Repealed Directives

25.1. Insurance Corporate Governance Directive No. SIB/48/2019 (1st

Replacement) is hereby repealed and replaced by this Directive.

25.2. Article 5 of Directive No. SIB/46/2018 is hereby repealed.

25. Effective date

This Directive shall enter into force as of the day of 2025.

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