Egypt’s FRA introduces new investment rules/ratios for insurance companies

Written by Adam Cadle

11/02/2025

Egypt’s Financial Regulatory Authority (FRA) has issued Decision No. 2 of 2025, introducing new investment rules and ratios for the funds of insurance and reinsurance companies.

This initiative aligns with the authority’s ongoing efforts to establish flexible regulatory frameworks that allow companies to diversify their investment channels, improve efficiency, and enhance the financial stability of the insurance sector, all while adhering to governance and risk management principles.

Under the revised rules, insurance and reinsurance companies must allocate a minimum of 5% of their free funds to open-end investment funds focused on listed stocks on the Egyptian Exchange (EGX). With FRA approval, direct investments in listed stocks may contribute to this 5%, provided that investments do not exceed 5% of the company’s paid-up capital or 15% of a fund’s net asset value, whichever is lower.

Free funds refer to shareholder equity, while allocated funds represent the obligations of insurance companies toward policyholders and beneficiaries. For allocated funds, companies are required to invest at least 2.5% of their paid-up capital in open-end investment funds that specialise in listed stocks. The same investment caps—5% of paid-up capital or 15% of a fund’s net asset value—apply. With FRA approval, direct stock investments may also fulfill this 2.5% requirement. However, total investments in stocks and open-end investment funds must not exceed 30% of allocated funds.

The FRA has also imposed a 5% limit on investments in commodity and metal funds or any exchange-traded instruments backed by metals on EGX.

In the real estate sector, the FRA said life insurance companies may invest up to 10% of their invested funds in real estate funds, while property and liability insurers are limited to 5%. Given the long-term nature of life insurance investments, the same 5% or 15% cap applies to investments in individual real estate funds. However, these restrictions do not apply to real estate funds established by insurance companies themselves.

For the first time, FRA is introducing regulations for investments tied to unit-linked insurance policies. Companies must segregate these investment-linked funds into independent accounts managed through a dedicated electronic system. Additionally, they are required to maintain a detailed investment register that includes policy numbers, client names, invested amounts, investment instruments, portfolio returns, and any other data requested by the FRA.

A key provision in the new regulations mandates public disclosure of investment performance. Companies must publish returns and unit prices for unit-linked policies separately for each investment portfolio on their websites, updating this information at least once a month. Additionally, total costs, fees, and other charges associated with managing these investments must not exceed the amounts specified in FRA-approved insurance policies.

The FRA emphasised that these regulatory updates are in line with Law No. 155 of 2024, which has been in effect since July 2024. They reflect ongoing developments in the insurance and reinsurance sector while ensuring compliance with global best practices.

Related Articles