The National Bank of Ethiopia (NBE) has limited the amount of time an external auditor can work with an insurer to a maximum of six years as the latest measure in a barrage of new regulations for the insurance industry.
The new Licensing and Supervision of Insurance Business Directive No. SIB/64/2026 on External Auditors requires insurers to appoint external auditors through a competitive bidding process and caps how long an auditor can serve an insurance firm to two terms of three years each.
Insurers can only rehire an external auditor whose term limit has passed after a cool-off period of three years.
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State-owned insurance companies, notably the Ethiopian Insurance Corporation (EIC), are exempt from the open bidding requirement in lieu of contracts with the Office of the Federal Auditor General or its designated appointees.
The NBE requires that members of an audit engagement team must not have been employed by the insurance company within the past three years. Additionally, insurers must ensure that external auditors submit both an “Independence Confirmation” and a “Fit and Proper Declaration.”
The directive defines independence as “freedom from conditions that threaten the ability of the external auditor to carry out responsibilities in an unbiased manner.” The “fit and proper” requirement assesses the auditor’s financial integrity, as well as their legal and criminal standing.
Insurance companies are required to obtain NBE approval for the appointment or reappointment of external auditors within 20 working days. Any revision to the terms of the audit engagement must also be approved by the central bank within 10 working days. Furthermore, insurers are prohibited from removing or replacing an external auditor without first notifying regulators.
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The directive obliges auditors to disclose their findings directly to shareholders, and to the NBE within three months of the end of the financial year. Following approval, the reports must be published on the insurer’s website within two weeks.
The directive also grants the central bank the authority to order the replacement of an external auditor in cases of conflict of interest, failure to meet eligibility criteria, or non-performance of required duties.
The NBE issued a total of four new directives this past week targeting the insurance sector, tightening regulatory oversight and introducing stricter compliance requirements that may prompt insurers to restructure and adjust their operations.
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