EAS no.47: Insurers to allocate a reserve
Insurance companies in Egypt will be required to allocate reserves equivalent to one percent of their assets and net profits after taxes for fiscal year 2019/2020.
Financial Regulatory Authority chairman Dr. Mohammed Omran has issued decision No. 162 of 2020 in accordance with the Egyptian Accounting Standard (EAS) no. 47 wherein insurance companies will be obliged to allocate reserves against risks of implementing the new accounting standard, equivalent to one percent of their assets, from their net profits after taxes for fiscal year 2019/2020. This amount shall be included in shareholders’ rights.
Dr. Omran said that applying EAS no. 47 would increase the companies’ reserves by nearly EGP1.2 billion. Such measures would protect insurers against any potential risks and enhance their financial positions in accordance with international best practices, he added.
Dr. Omran emphasised that the Board should ensure the company’s commitment to allocate the new reserve. Also, The company’s Board would supervise directly the implementation of the EAS no.47 and check the needed requirements for application and coordination with various departments within the insurance company, including technical and financial departments, risk management, IT management, internal audit, and all relevant departments and remove any obstacles that may face implementation. The Board would also be responsible for the company’s subscription and investment policies, measuring the adequacy of information systems, availability of human resources and expertise and identifying business models to be used upon applying the standard.