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This legal alert has been necessitated by the enactment of the Insurance Act, number 38 of 2021 (“New Insurance Act”). The New Insurance Act repeals the current insurance Act, number 27 of 1997 (“Repealed Insurance Act”). From the onset, it is worth noting that the New Insurance Act will only commence on a date appointed by the Minister of Finance. The Minister has not yet appointed the date on which the New Insurance Act is set to come into operation.
The Requirement to have Local Shareholding in Insurance and Reinsurance Companies
Once the Insurance Act is operationalised, there will be need for 30 percent of the issued share capital of all insurance or reinsurance companies to be held by Zambians. Section 49 of the New Insurance Act provides that a licensed insurer or reinsurer shall not have less than 30 percent of the share capital owned by citizens of a citizen owned company. A citizen owned company is a company where 100 percent of its equity is owned by citizens and which citizens have significant control of the management of the company.
Brokers are also Required to have Zambian Shareholding
The requirement to have citizens as shareholders also extends to insurance brokers. In fact, the local shareholding requirements for insurance brokers is higher than that of insurance or reinsurance businesses.
Section 49 (2) of the New Insurance Act states that a licenced insurance broker shall not have less than 50 percent of its issued share capital owned by citizens of a citizen owned company.
Whether Existing Insurance Businesses and Brokers are Required to Comply with Local Content Laws
Based on the provisions of section 49 (3) of the New Insurance Act, a licensed insurer, reinsurer or insurer broker licensed under the Repealed Insurance Act shall be required to comply with the shareholding requirements under section 49 of the New Insurance Act within a period that will be prescribed by the Minister of Finance.
No set period has been prescribed by the Minister of Finance yet. Therefore, it is still unclear how much time existing insurance businesses, reinsurers and insurance brokers will be given to comply with the requirement to have Zambian shareholding.
Consequence for Failure to Comply with Shareholding Requirement
A licensed insurance business, reinsurer or insurance broker who contravenes the requirement to have the prescribed Zambian shareholding commits an offence.