A Critical Analysis Of The Legal Restrictions On Shareholdings Of Insurance Companies Under Ethiopian Laws

Abstract

Though, the insurance industry is one of the most instrumental means to assist Ethiopia to achieve its macroeconomic stability and growth objectives, the Ethiopian insurance business proclamation highly restricted shareholding ownership on insurance company. However, once again coupled with the severe restriction of maximum holding at five percent, the rationality of this restriction may be questioned. As comparative study shows, limiting ownership by 5% of the subscribed capital of insurance is too strict. This affects the capital mobilization capacity of insurance in particular when viewed in relation to prohibition of an influential shareholder not to invest in other insurance companies. This intern directly affects the efficiency and competitive advantage of insurances and this needs some relaxation. As part of a concluding remark, strict regulation including in the area of shareholding ownership in insurance and by insurance puts insurance at disadvantage and the country’s policy should be reviewed so as to minimize restrictions and address adverse concerns by scaling up its regulatory capacity