Ethiopia Drafts Sweeping New Insurance Law Proposing Foreign Investment, Regulatory Sandbox and Takaful Framework

EBR_News Apr 27, 2026

Betegbar Yaregal

A new draft insurance proclamation circulating among stakeholders proposes the most significant overhaul of Ethiopia’s insurance sector in over a decade, including the introduction of foreign ownership, an independent regulator, and a regulatory sandbox for innovative products, according to a copy of the draft insurance proclamation reviewed by Ethiopian Business Review.

The draft, which would repeal the 2012 Insurance Business Proclamation and its 2019 amendment, remains in the consultation phase and has not yet been enacted into law.

The draft proposes for the first time to allow foreign insurers to enter the Ethiopian market by establishing partially or fully owned subsidiaries, acquiring shares in existing insurers, or opening representative offices. Under the draft, strategic investors would be capped at 40 percent direct shareholding, while non-strategic foreign individuals would be limited to 7 percent and foreign juridical persons to 10 percent. The aggregate shareholding by foreign nationals would not exceed 49 percent of an insurer’s total subscribed shares.

Initial investments would be required in foreign currency, though dividends could be reinvested in Ethiopian birr. The draft establishes the Ethiopian Insurance Regulatory Authority (EIRA) as an autonomous body with its own juridical personality, operationally independent from the National Bank of Ethiopia, which would be replaced as the primary supervisor of the insurance market.

The draft introduces a regulatory sandbox framework, allowing live, time-bound testing of innovative insurance services under regulatory oversight, a first for Ethiopia’s financial services sector.

The draft officially defines and proposes licensing for Takaful (Islamic insurance) and Re-Takaful operations, complete with Shariah governance requirements. It also introduces an “Inclusive Insurer” license targeting underserved populations and the informal economy.

The draft proposes an effective resolution regime for failing insurers, requiring recovery plans and empowering the Authority to create “bridge insurers” to take over critical functions of failed institutions. Insurers would be mandated to have dedicated units for risk management, internal audit, actuarial services, and compliance.

Criminal penalties proposed include 10 to 15 years imprisonment for operating without a license. The draft includes transitional provisions stating that foreign nationals of Ethiopian origin who acquired shares under the previous law would retain domestic investor status. Banks and microfinance institutions currently offering microinsurance would need to apply for relicensing.

The draft would take effect upon publication in the Federal Negarit Gazeta if approved by the Council of Ministers and Parliament.