The National Bank of Ethiopia (NBE) has capped external auditor tenure for insurance companies at a maximum of six years, structuring the limit as two three-year terms with mandatory competitive bidding for appointments.
The new Licensing and Supervision of Insurance Business Directive No. SIB/64/2026 on External Auditors requires insurers to obtain NBE approval within 20 working days for auditor appointments or reappointments. Any changes to audit engagement terms must be approved within 10 working days.
Insurers seeking to rehire an external auditor whose term has expired must observe a three-year cool-off period before reengagement. The directive mandates that audit engagement team members must not have been employed by the insurance company within the past three years.
The NBE defines auditor independence as > "freedom from conditions that threaten the ability of the external auditor to carry out responsibilities in an unbiased manner."
External auditors must submit both an "Independence Confirmation" and a "Fit and Proper Declaration," with the latter assessing financial integrity and legal standing. Auditors are required to disclose findings to shareholders and the NBE within three months of the financial year end, with approved reports published on insurer websites within two weeks.
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State-owned insurance companies, including the Ethiopian Insurance Corporation (EIC), are exempt from competitive bidding requirements and may contract with the Office of the Federal Auditor General or its appointees.
The directive grants the NBE authority to order auditor replacement in cases of conflict of interest, failure to meet eligibility criteria, or non-performance. Insurers are prohibited from removing external auditors without first notifying regulators.
The auditor tenure limits represent the latest in a series of regulatory tightening measures for Ethiopia's insurance sector. The NBE issued four new directives targeting the insurance industry in the past week, introducing stricter compliance requirements that may prompt operational restructuring across the sector. The six-year cap aligns with international best practices for maintaining auditor independence while ensuring continuity of financial oversight.
