ST.

MARY’S UNIVERSITY
BUSINESS FACULTY
DEPARTMENT OF MARKETING
MANAGEMENT
Risk Management and Insurance Group Assignment

By:
Bilisuma A. (RMKD 1568)
Eden K. (RMKD 1063)
Haymanot T. (RMKD 1069)
Kenean A. (RMKD 2421)
Saron B. (RMKD 1571)
Yordanos A. (RMKD 2229)
Section: H

Sub.To : Abebe Megeresa

May, 2022 G.CA
Addis Ababa, Ethiopia
PART I

.1 Historical Background of Insurance business in Ethiopia, Starting from foundation up to

present time
The Early Phase (1905 – 1950): As most scholars would agree, the commencement of modern
insurance service in Ethiopia dates back to the beginning of the 20th century. Regardless of the
scant documentary evidence to substantiate historical facts, the introduction of insurance in 1905
during the reign of Menelik II, left its birth-mark of modern insurance service in Ethiopia. It is
not, however, clear as to who took the first move to start the business. Some sources say that it
was the Habesha Bank (Bank of Abyssinia) which, acting as an agent for a foreign insurance
company, started rendering modern insurance service for the first time in Ethiopia. Others argue
that it was the Bank of Egypt that started to provide modern insurance service in Ethiopia.
Available sources also indicate that other foreign expatriates in Ethiopia took only brief time to
involve themselves in insurance business by acting as agents for foreign insurance companies.
Quite many agent offices were, therefore, operating in the country until Italy invaded Ethiopia in
1936. During the years of Ethio-Italian war (1936-1941) and until the end of World War II, only
Italian insurance companies were allowed to operate in Ethiopia and all other operators were
forced to terminate their services.
The Middle Period (Mid 1950s To 1974) : The year 1951 marked the end of what can generally
be conceived as the period of agents. This year witnessed the launching, for the first time in
Ethiopia, of an insurance company called Imperial Insurance Company. It was formed by joint
initiatives taken by some enlightened Ethiopians (some members of the royal family and the
ruling aristocracy), expatriates and foreign companies that had already established business in
Ethiopia. The significant expansion of business activities in the country, in general, and the
financial sector in particular led to the coming into existence of some more insurance companies.
According to the Central Statistics Office’s (CSO) survey on Insurance Companies Operating in
Ethiopia, carried out in 1962, there were two domestic companies and 32 foreign companies, the
latter represented by 18 agents. The two registered domestic companies were Imperial and
National Ethiopian Insurance Company. A preliminary survey undertaken in 1967 by the Addis
Ababa Chamber of Commerce reported that 30 foreign companies represented by branches and
agents and 10 domestic insurance companies were transacting insurance business in Ethiopia.
These numbers increased to 33 and 15 respectively in 1970. However, though there were quite a
substantial number of agency offices transacting in Ethiopia, none of them excel over the others
and were able to dominate the market. With the coming of one national insurer the market was
dominated by its huge presence by occupying about 30 % of the market premium to its account
within a very few years of opening.
The Period Of Monopoly (1974 To 1994): The political change that took place abruptly in 1974
marked a turning point in the insurance operation as it did in all other economic sectors. Literally
every sector of the economy was falling under the government control, owning to the socialist
ideology, and the country became victim of retarded economic development. Those thirteen
privately owned insurance companies operating immediately before the socialist revolution were
nationalized as of January 1, 1975 by Proclamation No. 261/1974. The nationalized companies
were first made to operate as autonomous business entities operating independently and without
changing their organizational structures. Then, in January 1976, all those autonomous branches
were merged, and the Ethiopian Insurance Corporation (EIC) was formed by Proclamation
No. 68/1975, repealing proclamation No.281/70. With a paid up capital of Birr11 million, the
Corporation reorganized itself in to six Main Branches, streamlined based on geographical
structure, to transact general insurance business. Each Main Branch with its respective sub-
branches around the country was made to report to the Head Office. There was also another one,
Life Main Branch that was set up without any branch network. This was with the aim of
rendering service all over the country from the main branch office in Addis and through
commission agents stationed at various cities including Addis Ababa. After May 28, 1991, when
a change in government took place, free market principles began to operate. In February 1994,
the Licensing and Supervision of Insurance Business Proclamation No. 86/1994 were issued.
Subsequently, new privately owned insurance share companies emerged gradually and the period
of monopoly came to an end.
The Current Period (1994 On Wards): Following the change of government in 1991, a new
economic order has been adopted which principally aimed at reorienting the economy along the
free market path and economic recovery by doing away with the centralized economic system. In
the effort to assist such reforms, the then transitional government issued various decrees, laws,
directives, etc. Among these, the Licensing and Supervision of Insurance Business Proclamation
No. 86/1994 that was enacted on 1st February 1994 allowed the operation of insurance business
to private investors of Ethiopian nationals only. Moreover, it gave the power and authority to
License and to supervise insurance business in Ethiopia to the Nationals Bank of Ethiopia
(NBE). Subsequent to the proclamation, new private insurance share companies took license
from NBE within a brief time and started operation immediately. In response to this change, the
Corporation was reestablished and restructured in accordance with the Council of Minister’s
Regulation No. 201/1994 issued on 19th September 1994 with a fully paid up capital of Birr61
million. Moreover, the corporation was made under the governance of the Public Enterprise
Proclamation No. 25/1992. The monopoly power of the Ethiopian Insurance Corporation has
apprehended with the opening up of private insurance companies since 1994. Currently,
therefore, the market premium is shared amongst one state-owned and 13 private companies.
Q.2 Rate making, under writing & Claim settlement
a. Rate making: Four basic standards are used in rate making: (1) the structure of rates
should allocate the burden of expenses and costs in a way that reflects as accurately as
possible the differences in risk—in other words, rates should be fair; (2) a rate should
produce a premium adequate to meet total losses but should not bring unreasonably large
profits; (3) the rate should be revised often enough to reflect current costs; and (4) the rate
structure should tend to encourage loss prevention among those who are insured.
Some examples will illustrate the nature and application of the criteria outlined above. In life
insurance, the rate is generally more than adequate to meet all reasonably anticipated losses
and expenses; in other words, the insured is charged an excessive premium, part of which is
then returned as a dividend according to actual losses and expenses. The requirement that the
rate reflect fairly the risk involved is much more difficult to achieve.
b. Underwriting essentially involves selecting of risks for insurance and determining what
terms to assign, and premiums to charge.
I. Premium determination
Use of rating guides, which contain pricing tables, general underwriting and rating
rules, policy wordings, endorsements, warranties, questionnaires. The rates provided
are for minimum rates, which should be viable and economical and are for well run
businesses or risks. Special discounts on premium may be allowed on the basis of:
Large portfolio, good loss history, good housekeeping, Proximity of town fire
brigade.
II. Underwriting expense
Expenses incurred in getting policies on to the books including commission and certain
sales expenses. Other sales expenses which are incurred irrespective of whether the
policy gets on to the books, including the cost of sending out renewals, quoting for
 new business, conducting surveys Maintenance expenditure while the policy is on the
books including the cost of endorsements.
c. Claim settlement procedures
I. Claims Handling Procedures
The office will usually employ specialist loss adjusters to advice on the claim. Loss adjusters are
members of the Chartered Institute of Loss Adjusters, entry to which is by examination together
with an experience qualification. The loss adjuster is nominally independent of the insurer and
tries for a settlement that is fair to both sides, but as his fee is paid by the office he cannot really
be independent. Because of this some claimants employ specialist loss assessors to negotiate on
their behalf. The loss assessor's fee is paid by the claimant and is not recoverable under the
insurance. The loss adjuster is briefed by the office on details of cover and any warranties. From
his examination of the aftermath of the fire he will give an opinion as to whether the claim is
valid. As investigations and negotiations proceed, he will also advise the office on the
appropriate reserve.
To help him advice on liability and quantum, the loss adjuster may call on other professionals. If
there is any suspicion of arson (perhaps evidence of accelerants) he will bring in forensic experts.
Consulting engineers will advise on the extent to which property is damaged and whether it can
be repaired. The loss adjuster will also take such steps as are necessary to minimize losses. For
example, he will arrange for buildings to be Shored up, machines to be greased to minimize
water damage, and for the disposal of salvage. There are specialist firms who deal in
dehydration, rehabilitation of furnishings affected by smoke, etc., and the loss adjuster will use
them as necessary.
II. Claim settlement procedures; This involves generally,
a. Notification to Police for malicious damage
b. Action to prevent further damage
c. Full information and details to insurer within 30days
d. Forfeiture of Benefit of Policy if claim is fraudulent
e. Reinstatement - At the option of reinsurer
f. Insurers’ rights following a claim
g. Contribution and average
h. Subrogation
i. Arbitration
Q.3 Co-insurance, Riders and Re-insurance in Ethiopian insurance industry
Currently, Ethiopia government permits the opening of reinsurance by local insurance companies
to prevent the outflow of foreign currency with the legal minimum paid up capital to establish a
reinsurance company is set at Birr 500,000,000 (Birr Five Hundred Million) equivalent to USD$
25 million. Ethiopian Reinsurance S.C (Ethiopian Re) is the first reinsurance Company
incorporated under the provisions of article 5(8) of the Insurance Business Proclamation
No.746/2012 and subscribed capital of Birr 1,000,000,000 (Birr One Billion) equivalent to
USD50 million which by any standard is huge for a company just started operation. It
commenced operation on 1st July 2016, transacting both life and non-life businesses. Ethiopian
Re’s head office is located in Addis Ababa, Ethiopia. The Company has also a plan to open
branches in other countries as and when necessary.
Relying on its relatively strong capital base, plus sound retrocession protection provided by
world renowned reinsurance companies, Ethiopian Re provides a comprehensive range of inward
reinsurance cover to domestic insurers, in addition to accepting international business on
selective basis. In doing so the Company strives to mobilize financial resources which would
then be invested to generate income not to mention the role it plays in reducing hard earned
foreign currency outflow through cross border reinsurance transactions.
Moreover, as the first reinsurance Company in the country, Ethiopian Re endeavors to enhance
underwriting capacity and solvency of direct insurers through providing technical support and
cover against individual and accumulated catastrophic losses. It also strives to simplify treaty
negotiations, settlement of claims and payment of ceded premiums in domestic currency within
the shortest time. Ethiopian Re would strive to secure business from domestic and international
markets. In the short term however it primarily focuses on building strong market base in
Ethiopia. Ethiopia will remain the major source of the Company’s business in the foreseeable
future. However, the Company has a well thought plan to expand its reach to international
markets with special focus on accepting business from African, Middle East and Asian markets
on selective basis.
Q.4 Major issues in the regulation of insurance companies
Different prudential and administrative directives have been issued and executed by NBE, which
is expected to lay down a common level playing field. The current Proclamation on insurance
business set forth conditions for insurers to carry out business such as; the insurer should be a
‘domestic company’; it should have a share capital fully subscribed as outlined in the
Proclamation, and it should have to fulfil the licensing requirements prescribed therein. The
Proclamation also made it compulsory for insurance intermediaries (Agents and Brokers), and
auxiliaries (Actuaries and Insurance Assessors) to be licensed to work in the insurance business.
In general the proclamation dictates the following issues regarding the regulation of insurance
business in Ethiopia:

a. LICENSING of INSURANCE BUSINESS : Covers regulatory issues related with

Requirement for Obtaining License, Conditions of Licensing, Issuance of License and
prohibitions.
b. SHARES AND SHAREHOLDERS MEETINGS: this part covers issues related with
Shares register, Limitations on the Acquisition of Shares, Shareholders meetings and
Limitations on voting rights
c. DIRECTORS AND EMPLOYEES OF INSURERS: Appointment of Directors and
Officer, Prohibitions, Suspension and Removal Measures by the National Bank.
d. FINANCIAL REQUIREMENTS AND LIMITATIONS: Maintenance of Required
Capital, Statutory Deposit and restrictions on using them, Margin of Solvency and so on.
e. FINANCIAL REPORTS, EXTERNAL AUDIT AND ACTUARIAL
INVESTIGATION: financial report, separation of accounts, appointment of auditors &
reports, etc
f. DISCLOSURE OF INFORMATION AND EXAMINATION OF INSURERS: this
issue covers Disclosure of Information, Examination of Insurers, corrective measures.
g. SUSPENSION OR REVOCATION OF LICENSE AND RECEIVERSHIP AND
LIQUIDATION: this part covers issues related to Grounds for Suspension or
Revocation of License and Receivership,
h. REGULATION OF INSURANCE AUXILIARIES, LOSS ADJUSTERS AND
ACTUARIES: Covers issues related with license requirements, renew, revocation &
prohibition and Loss Adjusters and Actuaries.
MISCELLANEOUS PROVISIONS: Covers regulatory issues related with Dealing with
Foreign Insurers, Restrictions on Loans and Financial Guarantees by an Insurer, Changes in
Particulars Accompanying Application for License & so on.

PART II

1.
 Transfer / insurance is the suitable risk handling tool to apply in case a physical damage
to his car happens.
 If a liability lawsuit happens against him because negligent operation of his car his
insurer can handle the risk. So Transfer / insurance is the appropriate risk handling tool.
 The best risk handling tool in this case is retention since he cannot buy an insurance
policy for all his personal properties including the non-essentials.
 Regarding the risk of the disappearance of the contact lenses Girma is better off using the
retention risk handling tool, where he himself bears the financial loss that arises.
  Inorder not to face the risk of being assaulted by drug dealers Grima could use the
avoidance risk handling tool and avoid running in the area where this risk is present.
 The risk of loss of tuition fees can be handled by transfer/insurance by buying education
insurance policies and eventually cover his tuition fees

2. a). The normal rule is that liability insurance on borrowed car is primary and any other
insurance is considered excess. Therefore here, biruk’s policy is primary and Tsion policy is
excess. So Tsion policy doesn’t pay until biruk policy limits are exhausted. By the rule, Tsion is
covered under her policy as she is driving a friend’s car with the permission of the owner. She
also covered under biruk policy. If court awards a liability judgment of 100,000 against Tsion;
Biruk policy will pay 100,000 as his limit is 250,000 and Tsion policy will pay nothing.

b) If the liability judgment is 300,000, in that case biruk’s policy will pay 250,000 as his limits
is 250,000 and Tsion’s policy will pay remaining 50,000 as her policy limits is 100,000.

C, 100,000

PART III

3, A risk management program is the formal process utilized to quantify, qualify, and mitigate
specific concerns an organization may discover or define. Many companies have some form of
risk management program. These programs may be very mature and well defined or may appear
to have developed without planning or foresight. It is important for the security professional to
identify the program in place and understand the approach accepted in a particular company.
We visited webpage of National Bank of Ethiopia to answer Part III question and we have found
the following points which are More Related with the question.
Credit Risk Management Program
Managing credit risk is a fundamental component in the safe and sound Management of
companies. Sound credit risk management involves establishing a credit:
a) Risk philosophy
Policies and procedures for prudently managing the risk/reward relationship across a variety of
dimensions, such as quality, concentration, currency, maturity, collateral security or property and
type of credit facility.
Although credit risk management will differ among companies, a comprehensive credit risk
management
Program requires:
• Identifying existing or potential credit risks to which the company is exposed, on or off
Balance sheet, in conducting its investment and Lending activities and developing and
Implementing sound and prudent credit policies to effectively manage and control these risks;
• Developing and implementing effective credit Granting, documentation and collection
Procedures;
• Developing and implementing procedures to effectively monitor and control the nature,
Characteristics, and quality of the credit Portfolio; and
• Developing processes for managing problem Accounts.
b) Credit Risk Philosophy
The foundation of an effective credit risk management Program is the establishment of a
creditrisk philosophy.
A credit risk philosophy is a statement of principles and objectives that outlines:
• A company's tolerance of credit risk and will vary with the nature and complexity of its
business The extent of other risks assumed, its ability to absorb losses and the minimum
expected return acceptable for a specific level of risk.
c) Credit Risk Management Policies
An effective credit risk management program requires:
• The identification and quantification of the risks inherent in a company's investment and
lending activities, the development and implementation of clearly defined policies.
• These policies should be formally established in writing and set out the parameters under which
credit risk is to be controlled.
d) Credit Risk Measurement
Measuring the risks attached to each credit activity permits the determination of aggregate
exposures to counter parties for control and reporting purposes, concentration limits and
risk/reward returns.
The establishment of a system for the rating of credit forms a fundamental part of the
measurement process.
In developing a credit risk management program:
ƒ The Company should consider the extent to which credit risk in any part of a company's
operations could impact the company as a whole.
ƒ Credit policies establish the framework for the making of investment and lending decisions and
reflect a company's tolerance for credit risk.

ƒ To be effective, policies (as revised from time to time in light of changing circumstances)
should be communicated in a timely fashion, and should be implemented through all levels of the
organization by appropriate procedures.
e) Credit Policies Need to Contain:
A description of general areas of credit-related activities; clearly defined and appropriate levels
of delegation of decision-making approval authority and portfolio concentration limits. These
policies need to be developed and implemented within the context of credit risk management
procedures that ensure all credit.

Credit Policies
The foundation for effective credit risk management is the identification of existing and potential
risks in the bank’s credit products and credit activities. This creates the need for development
and implementation of clearly defined policies, formally established in writing, which set out the
credit risk philosophy of the bank and the parameters under which credit risk is to be controlled.
Measuring the risks attached to each credit activity permits a platform against which the bank
can make critical decisions about the nature and scope of the credit activity it is willing to
undertake.
A cornerstone of safe and sound banking is the design and implementation of written policies
and procedures related to identifying, measuring, monitoring and controlling credit risk. Credit
policies establish the framework for lending and guide the credit-granting activities of the bank.
The policies should be designed and implemented with consideration
for internal and external factors such as the bank’s market position, trade area, staff capabilities
and technology; and should particularly establish targets for portfolio mix and exposure limits to
single counterparties, groups of connected counterparties, industries or economic sectors,
geographic regions and specific products. Effective policies and procedures enable a bank to:
maintain sound credit-granting standards; monitor and control credit risk; properly evaluate new
business opportunities; and identify and administer problem credits. Credit policies need to
contain, at a minimum:
• A credit risk philosophy governing the extent to which the bank is willing to assume credit risk;
• General areas of credit in which the bank is prepared to engage or is restricted from engaging;
• Clearly defined and appropriate levels of delegation of approval, and provision or write off
authorities; and
• Sound and prudent portfolio concentration limits.
The basis for an effective credit risk management process is the identification and analysis of
existing and potential risks inherent in any product or activity. Consequently, it is important that
banks identify the credit risk inherent in all the products they offer and the activities in which
they engage. This is particularly true for those products and activities that are new to the bank
where risk may be less obvious and which may require more analysis than traditional credit-
granting activities. Although such activities may require tailored procedures and controls, the
basic principles of credit risk management will still apply. All new products and activities should
receive board approval before being offered by the bank.

Measurement Methods
The following are commonly used measurement techniques for interest rate risk exposure.
Depending on the complexity of their business, banks may use one or more of the methods
discussed below or may even opt for other acceptable ways of measuring such risk.

a) Gap analysis: The simplest techniques for measuring a bank's interest rate risk exposure
begin with a maturity/re-pricing schedule that distributes interest-sensitive assets, liabilities and
off-balance-sheet positions into “time bands” according to their maturity (if fixed rate) or time
remaining to their next re-pricing (if floating rate). These schedules can be used to generate
simple indicators of the interest rate risk sensitivity of both earnings and economic value to
changing interest rates. When this approach is used to assess the interest rate risk of current
earnings, it is typically referred to as gap analysis. The size of the gap for a given time band –
that is, assets minus liabilities plus off-balance-sheet exposures that re-price or mature within
that time band – gives an indication of the bank's re-pricing risk exposure.
b) Maturity/Re-pricing: schedule can also be used to evaluate the effects of changing interest
rates on a bank's economic value by applying sensitivity weights to each time band.
Typically, such weights are based on estimates of the assets and liabilities that fall into each
time-band, where duration is a measure of the percent change in the economic value of a position
that shall occur given a small change in the level of interest rates. Duration-based Weights can be
used in combination with a maturity/re-pricing schedule to provide a rough Approximation of the
change in a bank's economic value that would occur given a particular set of changes in interest
rates.
c) Simulation Techniques: Banks may employ more sophisticated interest rate risk
measurement systems than those based on simple maturity / re-pricing schedules such as,
simulation techniques which typically involve detailed assessments of the potential effects of
changes in interest rates on earnings and economic value by simulating the future path of interest
rates and their impact on cash flows. In static simulations, the cash flows arising solely from the
current on-and off-balance sheet positions are assessed. In a dynamic simulation approach, the
simulation builds in more detailed assumptions about the future course of interest rates and
expected changes in a bank's business activity over that time. These more sophisticated
techniques allow for dynamic interaction of payments streams and interest rates, and better
capture the effect of embedded or explicit options.

PART IV

Development of insurance
• Insurance in its older form existed in Roman for their burial society. People contributed
to fund and members pay to the common pool to cover cost of burial cost. Modern
insurance in the 17th century is mainly attributed to Lloyds of London. The earliest
modern insurance is probably marine insurance where marine was exercised by sharing
losses among seafarers as early as 9th century. Lloyds is the most known market for the
start of marine ships and cargo which were underwritten by merchants who were willing
to carry part of the risk of voyage. Edward Lloyds was the owner of Lloyds coffee house
which was situated in the London in 1688.
• Aviation business is the most recent as regular civil aviation started in 1919. Aviation
insurance started in 1923 by the British Aviation Insurance Group. Loss or damage to
property can be traced to fire insurance which is also the case in Ethiopia. In London fire
insurance started in 1667. The period of renaissance and the industrial revolution led to
further growth in the economy and the growth of towns which in turn increased risk of
fire. Fire brigades were initially organized by insurance companies. The growth of
insurance in engineering sector can also be attributed to the growth of technology which
has always been under development.

Functions of Insurance

Risk transfer is the main functions of insurance that is done by way of paying premium equitable
to one has brought to the common pool. The role of insurance companies is to take risks by way
of administering the pool

Schedule: Policies are usually standardized and it is personalized to insured person by way of
schedule. The facts that are stated in the policy to personalize the policy include, among others;
 the insured’s name and address
 the nature of the business
 Premiums
 Period of insurance
  sum insured
 the limits of liability
 policy number and reference made to any special exclusions, conditions
and aspects of cover
Signature - This refers to the signature of the Company’s official who has signed to show that
contract has been concluded.
Benefits of insurance
• Peace of Mind:
• Social Benefits:
• Investment of funds
• Loss control
• Invisible earning
Marketing insurance products
How insurance policy is included
1. For insurance to exist the first thing is a risk to be insured.
2. The proposer will offer the need for insurance.
3. The insurer, having assessed the risk either by proposal form filled by the proposer or by way
of both proposal form and survey risk assessment mechanism, determines whether to accept or
reject the risk. If the insurer decides to accept then it determines the terms and conditions of the
risk acceptance.
4. Once it determines the terms and conditions of the acceptance then the underwriter determines
the premium that is equitable to the risk brought to the common pool.
5. Issue the policy by stamping and signing on the policy.

General Structure of Insurance Market:

• Buyers
– the public,
– commercial enterprises/industries, and
– Government (public authorities).
• Intermediaries
– insurance agents,
– brokers(ordinary and Lloyd’s, reinsurance brokers)
– consultants and home service insurance agents
• Sellers
– Lloyds insurance companies or syndicates,
– ordinary life and general insurance companies, mutual indemnity associations,
– captive insurance companies,
– the state
• sellers
– friendly societies, and
– industrial life assurance
– Micro insurance
• Reinsurance companies
– Reinsurance companies
– consultants and home service insurance agents
We visited ETHIO LIFE AND GENERAL INSURANCE AND
THIS COMPANY DOES NOT OFFER SOCIAL INSURANCE

1, Engineering insurance

What do we insure in engineering?

• Mainly work plan

• Physical objects
• Future economic return
• Third party property and peoples
What peril do you insure against?
• Generally, any sudden physical loss or damage unless specifically excluded.
The nature of insured
• All those who have insurable interest
 How many are they?
• It depends on the type of risk.
• Road plan- lenders, project owners, contractors, sub-contractors
 Who is the insured? Is the owner and insured the same person?
The nature of sum insured
• Generally very large amount
• Increasing amount
• Decreasing in essence
• New replacement value
• Mostly beyond the capacity of an insurer
Engineering rates – price, premium
• Normally higher than other classes
• Not really clear cut
Period of insurance
• Duration is usually a year or more
• Normally project period with defects liability period (maintenance period) of one year.
Indemnity
• Compensation is equal to damage
• In some engineering insurance principles of indemnity do not apply
• Salvage value is taken into consideration
Other issues of the insurance
• Different terminologies
• Specialized science skill & knowledge in U/W and claims :- engineers
Types of engineering insurance
• This depends on the type of risk
 • All classes of engineering insurance have detailed questionnaire
• Schedule
• Endorsements with number codes

There are variations of covers for Construction Machinery, Machine Erection, Construction of
Building & Road and Boilers against their respective risks.

 The most common insured perils are risks involved following breakdown and/or
accidental damage to all kinds of machinery and plant.
 Any resultant loss of profit or revenue can also be insured.

Construction machinery
• Construction machinery: this includes earthmoving equipment, cranes and as well as site
vehicles not licensed for use on public roads (whether or not such machinery is owned by
the contractor);
Contractor’s Machinery
Examples of contractor’s machinery
 Tunneling Machinery,
 Drilling Rigs,
 Transportation (tractors, dump trucks), etc.
DOES NOT COVER FLOATING MACHINERY
2, Motor Vehicle Insurance

 There are THREE types of cover in motor insurance:

 Compulsory Third party Insurance /VIATPR/ = Third Party Cover only
 Third Party, Fire and Theft Cover
 Comprehensive Cover or the recently named Own Damage Cover

Motor Own Damage:

Insurance (full or partial) for damage to the policyholder’s own vehicle

Motor liability
Liability insurance for losses (material damage and personal injury) to third parties caused by
licensed vehicles.

Types of Motor Insurance

• Third Party Only (TPO) Cover
• Third Party, Fire and Theft (TPF and T) Cover
• Comprehensive Cover
• Additional Cover/Extension

Motor Policy
Comprehensive Cover

It provides covers against loss of or damage to the insured vehicles as a result of accidental
collision and/or overturning or fire or theft plus against Third Party Legal Liabilities in
accordance with the Ethiopian proclamation No. 559/2008 (Vehicle Insurance Against Third
Party Risks).

The policy can be extended to cover risks to Passenger Accident Benefit; act of Bandits, Shifta
and Guerrilla/ BSG/; Territorial Limit to Djibouti, etc.

Third Party Liability

This policy provides cover against Third Party Liability in accordance with the Ethiopian
proclamation No. 559/2008 (Vehicle Insurance Against Third Party Risks).

The liability limits of the insurer is described below

Third party Fire and Theft

This policy provides cover for damage to the vehicle from fire or theft in addition to Liability
against the Third Party insurance.

3, Employees Insurance
 Covers an employers’ liability that arise from employees injuries sustained at work;
 This is generally in line with the relevant country or state’s workers’ compensation act,
which in many cases imposes strict liability.
 An employer has a duty to take reasonable care to ensure the safety of employees.
 The duty arises from an implied contractual term in the contract of employment, and
from law of negligence
 The Ethiopian labor law holds an employer liable for death, bodily injury or illness of
employees from circumstances connected with their work or at the place of work. Hence,
WC insurance policy protects the insured (employer) from any loss that he might have to
suffer as a result of his having to meet such liability.

 Based on the Ethiopian Labour Proclamation No. 377/2003፣ Employers have liability in
respect to occupational injury” means an employment accident or occupational disease.
This policy provides cover against Employers’ Liability – due to death or bodily injury
by accident or occupational diseases arising from or at the work place & during the time
of work and in connection with employment.
 The insurance can also be extended to provide cover while the employees are in transit to
work and back to their home in the most uninterrupted route using a service supplied by
the employer.
 Coverage is generally limited to some degree either by quantum or time.

Scale of benefits
Death
 Permanent total disablement
Temporary total disablement
Medical surgical & hospital expenses incurred in connection with an accident

4, Individual health insurance

Covers the insured against any bodily injury caused by violent, accidental, external and visible
means which injury shall independently of any other cause be the direct and immediate cause of
death or disablement of the insured.

The cover can be extended by endorsement to cover Medical Expenses for Illness

 Term Life Assurance

 Ordinary Endowment
 Endowment Annuity
 Whole Life Assurance
 Children’s Education (with profit)
 Anticipated Endowment (with profit)
 Mortgage Protection Assurance

5, Incidental Fire Losses (property loss)

 Property damaged by water or other extinguishing agents used for extinguishing

purposes;
 Damage done by the Fire Brigade in execution of its duties e.g. in gaining access to a
fire;
 Property blown up to prevent a fire from spreading;
 Damage caused by falling walls or parts of a building in which a fire takes place;
 Damage by smoke and scorching;
 Loss or damage to property removed from a burning building caused by rain, theft or
damage during removal provided that the articles are justifiably removal mitigate a loss.
Fire insurance could be effected on the following assets

 1. Building and contents

 2. Office, furniture, fixtures and fittings;
 3. Plant, machinery, equipment and spare parts;
 4. Trade including raw materials, work-in-progress and finished goods etc.
Public Liability

 The Public Liability Insurance protects the insured against any legal liability incurred for
bodily injury to third parties or damage to their property. It is available to both businesses
and individuals.
Products Liability
  Products Liability Insurance covers the insured against liabilities arising out of any
injuries to third parties (or damaged to their property) caused by goods supplied, sold,
tested, serviced or repaired by the insured.

Construction machinery

Construction machinery: this includes earthmoving equipment, cranes and as well as site
vehicles not licensed for use on public roads (whether or not such machinery is owned by the
contractor)

6, Group life insurance policy

 Ordinary Group Term Assurance

 Modified Large Group Term Life Assurance
 Group Endowment
 Group Medical Assurance

7, Burglary Insurance (crime insurance policy)

 In insurance, burglary or theft is defined as theft involving entry to or exit from the
premises by forcible and violent means.
 This does not include entry to the premises by a key, by a trick or by hiding in the
premises whilst open for business (unless the thief subsequently makes his exist by
forcible and violet means).
 The intention of insurers in a burglary policy is to cover theft of property resulting from
the breaking down of the premises.
 The object of a Burglary Insurance Policy is to reimburse an insured for losses and
damages sustained through burglary and theft.

The bases of Burglary Insurance are

 – Under this basis the sum insured on each item is equal to its exact value at risk.
 First Loss Policy –Under the first loss policy basis the sum insured is deliberately
limited to a sum lower than the full value of the property with the insurer’s consent.

Factors to be taken into consideration in Burglary insurance

 Location of the premises containing the goods

 Security – The type of security systems employed within and around the building is an
important factor.
 Nature of goods stored – The degree of attractiveness of the goods
 stored matters. For example, jewelry and electronics are more
 susceptible to theft than items such as deep freezers, furniture etc.
 8, life insurance

Insurance providing for payment of a stipulated sum to a designated beneficiary upon death of
the insured.

Individual Level Term Insurance

Group Term Insurance

Endowment insurance with and without profit

Anticipated Endowment with and without profit

Pure Endowment with and without profit

School Fee Guarantee Insurance

Medical expense reimbursement insurance

Mortgage/Loan Protection Insurance and many other.