To improve investment strategies and boost transparency and oversight, the Financial Regulatory Authority (FRA) has introduced new regulations for private insurance funds. These regulations offer a wider range of investment options, impose stricter reporting requirements, and introduce tighter restrictions on uninvested cash balances.
The changes also provide private insurance funds operating under defined benefits systems with greater flexibility to diversify their investment portfolios.
Funds operating defined benefit pension plans are now allowed to invest up to 10 percent of their total assets in metal-related financial instruments traded on the Egyptian Exchange (EGX).
Defined benefit insurance funds are allowed to invest between 5 percent and 20 percent of their total assets in open-ended funds, as long as the investments in equity funds do not exceed 15 percent of the total assets of the equity fund. Additionally, up to 5 percent of the assets can be allocated to venture capital and private equity funds.
Private insurance funds that have already exceeded the newly set investment limits will not be required to divest their holdings immediately. However, these funds will be restricted from making additional investments that would breach the new limits.
The updated regulations offer greater flexibility for defined-contribution insurance funds, allowing their boards to develop and approve their own investment policies or to delegate the task to external investment managers. These policies must pre-approved by the FRA and align with the preferences of contributors, considering factors such as risk tolerance, expected subscription periods, and other relevant indicators.
In a move aimed at encouraging more efficient asset management, the FRA has imposed a 5 percent limit on uninvested cash balances for all private insurance funds. A 30-day grace period has been introduced, allowing funds to exceed this limit under certain conditions.
As part of these updates, the FRA now requires all private insurance funds to submit quarterly investment reports detailing their asset balances, bank deposits, securities held by custodians, and any other financial instruments related to investments. This requirement aims to ensure that the FRA can better monitor and regulate the market.
Furthermore, the regulations mandate that private insurance funds adopt digital platforms to allow their members to monitor their investments in real-time.
Private insurance funds are required to comply with the new regulations within six months from the decision’s issuance.
This move is part of the FRA’s broader initiative to regulate and enhance the performance of Egypt's non-banking financial markets.
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