The National Bank of Ethiopia (NBE) has introduced a sweeping new directive on the licensing and conduct of insurance brokers, tightening entry requirements, enforcing mandatory professional indemnity cover and setting clear grounds for suspension and revocation of licenses, effective 26 March 2026.
The “Licensing of Insurance Broker Directive No. SIB/62/2026” replaces earlier broker directives issued in 1995 and 2010 and is anchored in the Insurance Business Proclamation No. 746/2012 as amended by Proclamation No. 1163/2019. NBE says the new rules are designed to ensure brokers play a more professional role in helping clients procure and manage insurance, and to clarify how the business of insurance broking should be conducted.
Under the directive, an insurance broker must be established either as a sole proprietorship or as a limited liability partnership in line with the commercial and related laws. Applicants must be Ethiopian nationals, or in the case of partnerships, entities fully constituted by Ethiopian nationals, and must satisfy integrity tests including having no convictions for offences involving dishonesty.
The regulation significantly raises the bar for management and ownership of broking firms. Chief executive officers are required to hold either an advanced diploma in insurance from the Chartered Insurance Institute (UK) or an equivalent institution, or at least a first degree in a business-related field, alongside three to five years of reputable managerial experience in insurance depending on their qualification. Partners in limited liability partnerships must have at least a first degree and 10 years of insurance experience, including four years in a managerial role.
While existing brokers and their current CEOs and partners are given relief from some of the new academic and experience thresholds, all pending license applications will be judged against the latest criteria. In a major structural change, brokers that are currently licensed as other forms of business organisation are required to reorganise as limited liability partnerships within five years of the directive’s coming into force.
The directive also sets out detailed information and infrastructure requirements. Applicants must submit a completed NBE application form, curriculum vitae and supporting documents for key personnel, a professional indemnity policy, photographs of the proposed CEO, a memorandum of association for partnerships and the full address of their principal place of business. Brokers are obliged to notify NBE in advance when opening or closing branch offices, and all branch operations must remain under the day‑to‑day purview of the CEO.
On conduct of business, the NBE outlines extensive duties and responsibilities for brokers toward their clients. Brokers are mandated to represent clients in negotiating insurance cover, to prioritise client needs over other considerations and to act with good faith and integrity. They must clearly explain the types and costs of insurance, offer a particular risk to at least three insurers and provide detailed information on chosen insurers and covers before placing business, unless a client has already selected an insurer in writing.
The rules reinforce brokers’ fiduciary obligations, including proper handling of premiums and claims payments and full disclosure of material facts to insurers. Where a client has given full information to a broker but the broker fails to relay all material facts to the insurer, resulting in repudiation of a claim, the client is given an explicit right to seek redress from the broker for resulting damages. Brokers must also maintain comprehensive records at their principal place of business, covering client identities, policies, premiums, sums insured and detailed claim histories.
In a bid to curb conflicts of interest, the directive prohibits spouses and first‑degree relatives of sole proprietor brokers, CEOs or partners in broker firms from holding any equity interest in insurance companies, loss‑adjusting firms or actuarial firms. Every broker is further required to maintain a valid professional indemnity insurance cover at all times, with a minimum limit of indemnity set at three times the broker’s annual general commission or one million birr, whichever is higher. Copies of valid policies must be filed with NBE at inception and every renewal.
Licenses will now be renewed annually and brokers must submit renewal applications, proof of renewal fee payment and evidence of a valid professional indemnity policy within one month of license expiry. Failure to apply for renewal within 12 months of expiry will lead to automatic cancellation, and any broker seeking to re‑enter the market after that must fully meet all requirements of the new directive.
The NBE has also defined a penalty framework and regulatory sanctions. Non‑compliance with its directives or the underlying insurance proclamations attracts a fine of 10,000 birr. The central bank may suspend a broker’s license if the firm operates without a CEO for more than four months or if supervisory investigations so warrant, and it may revoke licenses where brokers seriously breach their duties, violate relevant laws or are deemed harmful to the proper functioning of the insurance industry or the interests of clients. Brokers that fail to maintain valid professional indemnity cover at all times will see their licenses automatically cancelled.
The directive took effect on 26 March 2026, marking the start of a new regulatory era for insurance brokers in Ethiopia and signalling a tighter supervisory stance by the National Bank over intermediaries in the growing insurance market.
