• Draft law allows foreign insurers to enter market under ownership limits

• Foreign stakes capped at 40% per firm and 49% combined

• Reform aims to boost competition in a sector with low penetration

Ethiopia’s central bank has introduced a draft law that opens the country’s insurance sector to foreign investors, marking a new step in its broader economic liberalization.

Published in late April 2026, the “Draft Insurance Proclamation” allows foreign insurers to establish wholly or partly owned subsidiaries, acquire stakes in local companies, or open representative offices.

The framework includes safeguards to protect domestic interests. Strategic foreign investors will not be allowed to hold more than 40% of an existing Ethiopian insurer. Other foreign investors will also face ownership limits, while total foreign participation—including foreign nationals and Ethiopian entities owned by foreigners—cannot exceed 49% in any local insurance company.

The draft, prepared by the National Bank of Ethiopia, states that foreign investments must comply with the country’s foreign direct investment rules, including requirements related to foreign currency. Investors will be allowed to repatriate earnings, including dividends, salaries, and proceeds from share sales or liquidation, in line with existing regulations.

The Ethiopian Insurance Regulatory Authority (EIRA) will retain broad oversight powers. It may impose additional conditions on licensing and foreign participation, limit the number of foreign subsidiaries, and set minimum capital requirements, governance standards, and fit-and-proper criteria for executives and board members.

A sector with low penetration

Ethiopia’s insurance market includes about 20 insurers and a single reinsurer. Insurance penetration has remained around 0.3% of GDP for several years, well below African and global averages.

Although local insurers have recorded growth in premiums, limited competition has constrained innovation, reduced product diversity, and restricted coverage for major risks in areas such as agriculture, infrastructure, and climate resilience.

The reform follows a recent law that opened Ethiopia’s banking sector to foreign investors. That legislation allows foreign banks to enter the market through subsidiaries, representative offices, or minority stakes of up to 49% in local banks.

Opening both banking and insurance to foreign capital forms part of a broader reform agenda led by Prime Minister Abiy Ahmed since 2018. The strategy aims to attract investment, reduce the role of the state in the economy, and support private sector-led growth in Africa’s second most populous country.

These reforms also include gradual exchange rate liberalization, the creation of a stock exchange, eased foreign exchange restrictions in some special economic zones, and the opening of the telecommunications sector.

Walid Kéfi