History of insurance in Ethiopia

Modern Insurance Service in Ethiopia started in 1905. Before the commencement of Modern
Insurance Service in the country, there have been traditional practices by which people help each
other whenever they face either financial difficulties or needs assistance. “Edir” and “Ekub” are
Examples of such traditional practices and have some similarities with Modern Insurance.
In the case of “Edir” people form an association where by each member contributes a fixed
sum, normally monthly, to a common fund from which predetermined compensations are paid to
members upon occurrence of unforeseen events such as death of family members or relatives.
The compensation is meant to cover expenses that a member would incur as the result of the
incident. The “Edir” also owns physical assets like tents, household goods like plate and
drinking cups, chairs and the like used mainly during the periods of mourning.
The other insurance type of association is “Ekub”. “Ekub” members contribute a fixed sum of
money weekly, fortnightly, or monthly to a pool of fund and lots are cast where upon the winner
receives the money so collected and uses it for a project if he or she has owned or sell it to
another member at a premium. If something happens to a member, who had already taken the
money that would not enable him to continue contributing to the fund, his guarantor will have to
be held responsible.
Insurance, being one of commercial activity, its historical growth is associated with what a
human being now reached in the fields of Science, Technology, Law, Economy, Culture and
Politics.
- The initial phase started in 1905 when insurance business used to be transacted by an
Egyptian Bank which Served as agent of Foreign Insurance Company. The Covers given
by the Bank were Fire and Marine Risks.
The late 1930, that is during the five year Italian occupation, signifies the existence of a
number of Insurance Companies in the country. At that time only in Italian Insurance
Companies had been operating and other Non-Italian Companies were closed.
After liberation of Ethiopia from Italy in 1941, Seven Insurance Companies, most of them
British, were established. These were Phoenix, Caledonia, Royal, South British, London, Union
and Queensland.
The first motor insurance policy was issued in 1947 by the South British and all classes of
insurance cover, except life, were available by 1950.
Until the beginning of the 1950s, there was no locally incorporated insurance company in
Ethiopia.
In 1951, the first domestic insurance company, named Imperial, was formed.
In 1954 a study was conducted by the Ministry of Commerce & Industry to assess the existed
situations of the Insurance Industry in the country. The study noted, that there were 19 insurance
companies in the market out of which Imperial were the only local company. And, others
companies had been operating in the market as an agent of Foreign Companies.
In 1959 of the total number of vehicles in the country and the value of goods imported from
abroad only 50% and 14% were covered, respectively. During the same period 9 Insurance
companies were registered to give Life Insurance and total number of policy sold were 541.
A second study conducted by Ministry of Commerce and Industry in 1960 indicated that the
number of insurance companies reached to 33 and still Imperial Insurance company was the only
domestic companies.
Until 1960, there had not been any insurance law. But in 1960, two bodies of law were enacted
one of them was the Maritime Code of Ethiopia. In Title VII. Chapter 1-4, Articles 288-356,
marine insurance has been properly dealt with. The other was the Commercial Code of Ethiopia.
This law contained provision on the relevant points of insurance as a commercial activity,
especially for property, liability and the insurance of person. Title III, chapters 1-4, Articles 654
– 712 of the commercial code mainly the manner under which insurance contracts are entered
into the rights and duties of contracting parties.
A preliminary study was conducted by the Addis Ababa Chamber of Commerce in 1967 to
investigate complains arose by unfair trade practice among insurance company. The study shows
that there were 30 Foreign and 10 Local companies in the market. And it also pointed out two
major problems.
These were nonexistence of compulsory third party motor insurance law and detailed Insurance
law that regulated and control the activities of Insurance.
On the basis of the provisions of Article 656 of the commercial code, proclamation No.281/1970,
known as the Insurance proclamation (dealing specifically with insurance business), was issued
at October 8, 1970 to regulate the market.
Therefore, it should be noted that the Commercial and Maritime Code of 1960 served as the only
law that governed the insurance business in Ethiopia up to 1970.
When the first insurance proclamation came into existence there were already 21 companies in
the market.
The Proclamation Limited Insurance to Ethiopian nationals and banned foreign companies to
operate in the country either directly or through agent.
The minimum requirements like the ownership and capital structure, records to be kept and
returns required by the controller of insurance were all stated in the proclamation.
This proclamation assigned the task of controlling insurance activities to the Ministry of
Commerce and Industry.
Based on the provisions of the proclamation an Insurance Council was formed chaired by the
above ministry that included various government offices as a member. The main duties of the
council were formulating policies that encourage and control the activities of insurance,
Reinsurance, Investment and formation of new strong insurance companies in the market.

- By 1974, the revolution of Ethiopian People was followed by nationwide revolutionary

uplift. And, one of the first actions taken by the Provisional Military Government in
laying the foundation of command Economy was to nationalize the private companies.
Therefore, the existence & development of private companies became impossible.
In effect, 13 private Insurance Companies that had been operating in the market, during the
period, were nationalized. The nationalized companies were:
1. Imperial Insurance Company
2. Ethiopian American Life Insurance Company
3. National Insurance Company
4. Afro-Continental Company
5. Blue Nile Insurance Company
6. Afro Solidarity Insurance Company
7. Lion Insurance Company
8. Ethiopia Life Insurance Company
9. General Insurance Company
10. Pan African Insurance Company
11. International Insurance Company
12. Union Insurance Company
 13. Rasai Ethiopian Insurance Company
On the 1st January 1976 thirteen nationalized insurance companies merged under one
corporation. That is, the establishment of Ethiopian insurance Corporation.
/EIC/ by proclamation No. 68/1975, by taking over the assets and liabilities of the nationalized
companies with a paid up capital of 11 million Ethiopian birr, as a sole insurer in the country
with the following objectives.

 To engaged in all classes of insurance business

 To ensure that insurance service reach the broad mass of Ethiopia and
 To promote efficient utilization of resource.
The proclamation empowers the Corporation to manage, administer, supervise and direct all
insurance business transaction at national level and also negotiate, arrange, underwrite and
contract reinsurance treaties and policies with foreign reinsurers.
The first action taken by the Corporation was to consolidate small branches of the ex-companies
into bigger units and the following six regional main branches were structured.
1. The Northern Main Branches including Asmara and Massawa.
2. The Life Main Branch
3. The western Main Branch
4. The Southern Main Branch
5. The Eastern Main Branch
6. The North Eastern Main Branch
At the early stages, the Corporation was also pre-occupied with internal consolidation. Training
stood as a priority for taking over the duties and responsibilities of the nationalized companies
from expatriates, company managers and foreign advisors.
An early task in 1980 of the corporation was branch expansion to popularized insurance service
to the whole country. As a result, the following 11 new branches were opened in different cities
of Ethiopia.
- Combolcha & Mekele in the North Eastern part
- Bahirdar and Gondar in the North Western Part
- Arbaminch, Assela, Awassa , Robe & Zeway in the South Part
- Nekemet & Jimma in the western Part
The expansion was accompanied by the construction of a standard two storey building consisting
of office blocks and fully furnished staff residence quarters.
The Corporation also opened a new branch in Djibouti in 1980. During the same period, the
Ethiopian Insurance Corporation was underwriting reinsurance business mainly from other
African Countries.
Along with the opening of new branches life and Non-Life insurance agents were trained
assigned in a number of places throughout the country.
Ethiopian Insurance Corporation gave insurance service as a sole insurer for 19 years (1976-
1994).
Despite the corporation monopolize the market for 19 years Gross Premium Income of the
industry increases year after year, that is at the end of 1976 total premium income was
50,530,000 Ethiopian Birr this amount increases to 253, 968,000 Ethiopia Birr in 1994, which
is 406.6% growth.

- Following the 1991 change in Political and Economic Environment in the country, by 1992
the Provisional Government of Ethiopia enacted a new investment proclamation No. 15/1992
to encourage investment in the country.
Among the provisions of this proclamation chapter two Article (4) Sub Article (1) (e), stipulates
that Insurance, Banking and large scale financial institutions are areas reserved for the
Government to invest. However, Sub-Article (3) further states “the conditions under which
investment in banking and insurance business may be open to private domestic investors shall be
studied and decided by the Government”.

In 1994 the Licensing and Supervision of insurance business proclamation No. 86/1994 and the
Re-establishment of Ethiopia Insurance Corporation by council of ministers Regulation No.
201/1994 came into force.
The Licensing and Supervision proclamation allowed Domestic Private Insurance Companies to
flourish in the market.
This proclamation also vested the authority to control, licensing and formulating policies
regarding the insurance business to the National Bank of Ethiopia.
As of 19 September 1994 the Ethiopian Insurance Corporation was Re-established with a paid up
capital of 61 million Ethiopian Birr by council of Ministers Regulation No. 201/1994 with the
following objectives.
To engage in the business of rendering insurance services and
To engage in any other related activities conductive to the attainment of its purpose.
Currently, operating Insurance companies in Ethiopia are:Ethiopian insurance corporation,
United Insurance Company, African Insurance Company, National Insurance Company, Awash
Insurance Company, Nile Insurance Company, Global Insurance Company, Nyala Insurance
Company, Nib Insurance Company, Oromia Insurance Company, Abay Insurance Company,
Lucy Insurance Company, Tsehay Insurance Company, Birhan Insurance Company, Lion
Insurance Company, Ethio-Life Insurance Company, and Nice Insurance Company
86/1994 govern the terms and conditions for undertaking insurance business. As in the case
of banking, the Proclamation empowers the National Bank of Ethiopia (the Supervisory
Authority) to issue various Directives necessary to ensure the safe and sound operation of
insurance companies.