COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT

COURSE:-RISK MANAGEMENT AND INSURANCE

ROUPASSIGNMENT SECTIONIII

GROUP Member ID.NO

1. TerefeG/Mariam BEE/8716/10

2. Yohannes G/Egzi BEE/4527/10

3. Worknesh Gizaw BEE/6032/10

4. Mulugeta Fikadu BEE/8617/10

5. Meseret Fikre BEE/2212/09

6. Lili Hailu BEE/8290/10

Submission Date Sep 25, 2021

Submitted to: - INS Yonatan Gebre

Addis Ababa Ethiopia

ACKNOWLEDGMENTS
We would like to thanks our instructor Yonatan Gebre for his provision of knowledge, wisdom,
inspiration and diligence required for the preparation a group assignment on risk management and
insurance ,We would also like to express our heartfelt appreciation to our Instructor for his
relentless effort in shaping each and every stage of Insurances in Ethiopia starting from their
history up to their final activities which means we understood basic information how they
established and the definition of non-banking financial institutions ,He also helped us a lot by
giving the necessary information how the insurances get such as license requirements, not only
these how the insurances get each and everything to fulfill their requirements regularly
according to Ethiopian rules and regulations.

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Contents
Part I ................................................................................................................................................ 1

1. The Insurance Business in Ethiopia......................................................................................... 1

1.1. The Historical background of insurance business in Ethiopia: Starting from the
foundation up to the present time ................................................................................................ 1

1.2. Rate making, underwriting, claim settlement practices in Ethiopian Insurance Industry 1

A. Rate making...................................................................................................................... 1

B. Underwriting .................................................................................................................... 2

C. Claim settlement............................................................................................................... 2

D. Riders ............................................................................................................................... 2

E. Reinsurance ....................................................................................................................... 3

E. Major issues in Regulation of Insurance companies ........................................................ 4

2. Part II ....................................................................................................................................... 9

3. Part IV ....................................................................................................................................... 10

3.1. Nib Insurance Company ..................................................................................................... 10

3.2. Background ........................................................................................................................ 10

A. Life insurance..................................................................................................................... 11

B. INDIVIDUAL TERM ASSURANCE ............................................................................... 11

C. Group life and Health insurance ........................................................................................ 11

D. Engineering and construction insurance ............................................................................ 12

E. Motor and home owners insurance .................................................................................... 14

F. Bond insurances ................................................................................................................. 15

Reference ...................................................................................................................................... 16

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Part I

1. The Insurance Business in Ethiopia

1.1.The Historical background of insurance business in Ethiopia: Starting from the
foundation up to the present time
Traditional protection of risk in Eth5iopia can be found in the form of Edir and Equip where
people get in some financial contribution to save themselves and losses of properties from
unexpected troubles in the future.

Insurance business in its modern sense in Ethiopia started in 1905when the than Bank of Abyssinia
got underwriting authority in the form of an agency for Fire and Marine Insurance business. This
was further followed bubaline when it set up a branch office in Addis in 1923.the first local
insurance company was formed in 1951.

As result of nationalization of these companies in 1975, proclamation No. 68/1975 declared to

from the Ethiopian insurance Corporation with a capital of Birr 11 million. Was since
nationalization its premium production on the average has continual grown at the rate of 26. /5%
in 1976 to Birr 300 million in 1994/ 95. While its claims increased from 20 million in 1976 to Birr
160 million in 1991/92.

With the declaration of proclamation No. 86/94, which allowed the licensing and supervision of
insurance companies, there emerged seven more than private insurance companies with a total
capital of nearly Birr 205 million. The total market that was Birr 50 million 1976 reached Birr 345
million in two decades time. Insurance companies have reinsurance arrangements with reputable
international reinsures mainly from Munich Re, etc.

1.2.Rate making, underwriting, claim settlement practices in Ethiopian Insurance

Industry
A. Rate making
The process of establishing rates used in insurance or other risk transfer mechanisms. This process
involves a number of considerations including marketing goals, competition and legal restrictions
to the extent that they affect the estimation of future costs associated with the transfer of risk. An
insurance rate is the price per unit of insurance. Like any other price, it is a function of the cost

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of production. However, in insurance, unlike other industries the cost of production is not known
when the contract is sold, and will not be known until sometime in the future, when the policy
has expired. One of the fundamental differences between insurance pricing and the pricing
function in other industries is that the price for insurance must be based on a prediction. The
process of predicting future losses and future expenses, and allocating these costs among the
various classes of insureds is called rate making.

B. Underwriting
This is a procedure by which an insurer evaluate the risk of a proposal and decides whether or
not to enter into a contract, and if so on what terms. Underwriting is the process of selecting risks
offered to the insurer. It is an essential element in the operation of any insurance program, for
unless the company selects from among its applicants, the inevitable result will be adverse to the
company. Hence, the main responsibility of the underwriter is to guard against adverse selection.
Underwriting is performed by home office personnel who scrutinize applications for coverage
and make decisions as to whether they will be accepted, and by agents who produce the
applications initially in the field.

C. Claim settlement
Claim settlement is one of the most important services that an insurance company can provide to
its customers. Insurance companies have an obligation to settle claims promptly. You will need to
fill a claim form and contact the financial advisor from whom you bought your policy. The basic
purpose of insurance is to provide indemnity to the members of the group who suffer losses. This
is accomplished on the loss-settlement process, but it is sometimes more complicated than just
passing out money. The payment of losses that have occurred is the function of the claims
department. Life insurance companies refer to those employees who settle losses as “claim
representatives,” or “benefit representatives.” Employees of the claims department in the field of
property and liability insurance are called “adjusters.”

D. Riders
This policy the schedule and any memorandum thereon shall be considered one document and
any word or expression to which a specific meaning has been attached in any of them shall bear
such meaning throughout.

Conditions president to any liability of the corporation

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a) Observance of the terms of this policy relating to anything to be done or complied with by the
Insured or the insured person.

b) The truth of the proposal

The Corporation will indemnify the insured subject to the overall limit applicable to an insured
person in respect of all medical expenses within twelve months of and as the direct result of an
insured person falling ill or sustaining accidental bodily injury during the period of insurance. The
maximum amount payable by the corporation for medical expenses in respect of:

a) One claim or all claims of series (whether arising in one period of insurance or not) consequent
upon or attributable to one original cause shall not exceed the overall limit of indemnity applicable
to the insured person concerned.

b) Any one period of insurance for all claims where the disease and/or illness or bodily injury
becomes apparent during such period of insurance shall not exceed the overall limit of indemnity
applicable to the insured person concerned.

E. Reinsurance
An insurer assuming larger risk from the direct insurance business may arrange with another
insurer to off load the excess of the undertaken risk over his retention capacity. Such
arrangement between two insurers is termed as reinsurance. ‘Thus, by the device of reinsurance
the original insurer transfers part of the risk to the reinsurer. Payment made by the ceding insurer
(called original insurer or reinsured) to accepting insurer (called reinsurer) for the assumption of
the risk by the latter is termed reinsurance premium. ‘A reinsurance contract does not affect the
original insurer‘s contractual obligation to the insured under the original contract of insurance.
Moreover, in the absence of any private of contract between the reinsurance and the originally
insured person, the latter cannot have any remedy against the former. It is worth noting that since
a contract of reinsurance is also a contract of indemnity, the reinsurer, before paying the money,
must make sure that the sum originally insured has been paid by the original insurer‘ (or the re-
insured‘). Of course, after paying the money in proportion to the risk transferred to him, a
reinsurer becomes entitled to the benefits of subrogation. If for any reason, the original policy
lapses, the reinsurance also comes to an end. Furthermore, if the original contract is altered
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 without the consent of the reinsurer, the reinsurer is discharged. Hence, a policy of reinsurance is
co-extensive with the original policy.

E. Major issues in Regulation of Insurance companies

Art. 654. Definition

Insurance (policy) is a contract whereby a person, called the insurer, undertakes, against payment
of one or more premiums, to pay to a person, called the beneficiary, a sum of money where a
specified risk materializes.
According to this definition, insurance is a contract between two or more persons in which one
person called the insurer, agrees to pay the agreed amount of money or compensation to another
person, called the insured, or the beneficiary where the insured property is lost or destroyed ( in
cases of property insurance), or where the insured person incurs civil liability (in cases of liability
insurance) or where the insured person dies or suffers bodily injury or falls ill (in case of insurance
of persons). The insurer undertakes this obligation for consideration, called premium payable by
the insured person.
Sub Art(2) of the same article provides that a contract of insurance may be concluded in relation
to "damages" covering risks affecting property or arising out of the insured person’s civil liability.
These types of insurances are generally referred to as indemnity insurances, in which the insurer’s
obligation is to pay compensation, which is always equal to damage. Similarly, sub Art(3) provides
that a contract of insurance may also be made in respect of human person’s life, body or health in
which the insurer’s obligation is to pay the amount agreed upon (the sum insured). This is a type
of insurance in which the principle of indemnity or compensation is not applicable since human
life or body does not have a market value, hence the name Non-indemnity insurance.
Thus, a contract of insurance, as a contingent contract is a perfectly valid contract, and the general
principles of the law of contract which you discussed in chapter three (general contract) apply
equally to such a contract. Hence, to be valid, it must fulfill the following requirements: (i) there
must be an agreement between the parties (ii) the agreement must be supported by consideration,
(iii) the parties must be capable of contracting (must have capacity), (iv) the consent of the parties
to the agreement must be free from defects, (v) the object must be precisely/sufficiently defined,
legal or the object must not be illegal and immoral, and (vi) the form indicated by the shall be
observed.

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(1) An insurance policy is a contract whereby a person, called the insurer, undertake, against
payment of one or more premiums to pay to a person, called the beneficiary, a sum of money
where a specified risk materializes.

(2) Where damages are insured, the insurance policy shall extend to the risks affecting property
or arising out of the insured person's civil liability.

(3) Where persons are insured, the insurance policy shall extend to risks arising out of death or
life, or to risks arising out of injury to the person or illness.

Art. 658. - Particulars in the policy

The insurance policy shall show:

(a) The place and date of the contract

(b) The names and addresses of the parties

(c) The item, liability or person insured

(d) The nature of the risks insured

(e) The amount of the guarantee

(f)The amount of the premium

(g) The term for which the contract is made.

Art. 663. - Risks insured.

(1) The insurer shall guarantee the beneficiary against the risks specified in the policy.

(2) Unless otherwise agreed, risks arising out of unforeseen events or the Negligence of the
beneficiary shall be covered by the insurance.

(3) Notwithstanding any provision to the contrary, risks arising out of the intentional default of
the beneficiary shall not be covered by the insurance

Art. 665. - Duties of insurer.

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(1) The insurer shall pay the agreed sum within the time specified in the policy or when the risk
insured against occurs or at the time specified in the policy.

(2) The insurer's liability shall not exceed the amount specified in the policy.

Art. 666. - Payment of premiums.

(1) The beneficiary shall pay the agreed premium at the time specified in the policy.

(2) Notwithstanding any provision to the contrary, the policy shall not terminate as of right when
the premium is not paid in due time. The insurer shall demand payment.

(3) Notwithstanding any provision to the contrary, the policy shall be suspended after one month
from a demand under sub-art. (2) Where the premium is not paid.

(4) Where the period of one month has expired, the insurer may claim payment of the premium
or require the termination of the policy

Art. 670. - Occurrence of risk to be notified.

(1) Unless he is prevented by force majeure, the beneficiary shall inform the insurer of any
occurrence likely to render the insurer liable as soon as he knows of such occurrence or within
not more than five days.
(2) This period may not be shortened in the policy.
Art. 671. - Bankruptcy
(1) The insurance policy shall not terminate as of right where the beneficiary is declared
bankrupt. The- trustees in bankruptcy shall benefit by the policy and shall be liable for the
unpaid premiums.
(2) The trustees in bankruptcy and the insurer may terminate the policy within three months
from the judgment in bankruptcy.
(3) The policy shall terminate within one month from the insurer being declared bankrupt.
Art. 672. - Death of beneficiary.
(1) Notwithstanding any provision to the contrary, the policy shall continue with the heirs
where the beneficiary dies.
(2) The heirs and the, insurer may terminate the policy within three months from the
beneficiary's death.

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From the proclamation of Ethiopian government to provide for insurance business the following
important points are very important

LICENSING INSURANCE BUSINESS

Requirement for Obtaining License
1. It is prohibited to transact insurance business in Ethiopia without obtaining an insurance
business license from the National Bank.
2. No person may use the word ‘‘insurance’’ or ‘‘insurer’’ or its derivatives as part of the
name of any financial business unless it has secured a license from the National Bank.
3. Without the prior written approval of the National Bank.
4. Where the National Bank has a reason to believe that a person, in contravention of sub-
article (1) of this Article, is advertising for or carrying on insurance business, it may, in
order to ascertain the situation, require that all books, minutes, accounts, securities, records,
vouchers and other documents which are in the possession or custody of such person be
submitted to it and inspect same or cause same to be inspected.
5. Where any person undertakes insurance business without obtaining license and has
received
premiums or become obliged to perform under a contract of insurance, the National Bank
may apply to the Federal High Court for ordering the speedy and efficient return of such
premiums or the performance by such person of his contractual obligations.
SHARES AND SHAREHOLDERS MEETINGS
Shares and Share Register
1. Insurer’s shares shall be of one class and shall be registered as ordinary shares of same par
value.
2. Every insurer shall keep a register of shares as determined by the National Bank which
shall show the names and voting rights of shareholders. Any transfer of shares, which is
recorded in such register, shall be binding on both the transferor and transferee and provide
conclusive evidence of the transaction and transfer of title.
3. Any transfer of shares that is not recorded in the share register shall be null and void.
4. Any transfer of shares that makes any person influential shareholder shall be approved by
the National Bank before such transfer is recorded in the share register.

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 5. The register maintained under sub-article (2) of this Article shall be kept open to the public
for inspection, free of charge, at the insurer’s head office during its normal working hours.
DIRECTORS AND EMPLOYEES OF INSURERS
Appointment of Directors and Officers
A. Without prejudice to sub-article (1) of Article 16 of this Proclamation, a director, chief
executive officer or senior executive officer of an insurer shall be a person with honesty,
integrity, diligence and reputation to the satisfaction of the National Bank.
B. Appointment of any director, chief executive officer or senior executive officer of an
insurer at the time of licensing or at any time thereafter may not be valid unless written
approval is granted by the National Bank.
C. The term of office of outgoing directors of an insurer may not terminate until written
approval for the incoming directors is granted by the National Bank.
FINANCIAL REQUIREMENTS AND LIMITATIONS
Maintenance of Required Capital
I. The minimum amount of capital to be maintained by insurers shall be prescribed by
directive.
II. The National Bank may prescribe different capital and reserve requirements to be
maintained by different insurers depending on their risk profile.
III. Where the National Bank determines that the capital and reserve of an insurer is below the
prescribed minimum, it may require the insurer to take, within a specified period of time,
measures necessary to rectify the situation.
FINANCIAL REPORTS, EXTERNAL AUDIT AND ACTUARIAL INVESTIGATION
Financial Report
 The National Bank may direct insurers to prepare financial reports in accordance with
international financial reporting standards, regardless of the change in their designations or
their replacement, from time to time.
 Every insurer shall register and keep documents for each type of transaction. The types of
financial statements, required entries of such documents and the formats may be prescribed
by directive.
DISCLOSURE OF INFORMATION AND EXAMINATION OF INSURERS
Disclosure of Information

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  Every insurer shall, within a time limit to be determined by directive, send to the National
Bank:
 The exhibition and publishing of financial statements pursuant to sub-article (2) of this
Article shall occur within two weeks after the annual shareholders meeting
 The National Bank may collect any information from insurers, as it may deem appropriate;
provided, however, that such information may not be disclosed to any person unless the
disclosure:

2. Part II
Question 1

Biruk took his friend, Tsion, out to dinner on her birth day. While driving Tsion home,
Biruk became ill and asked Tsion to drive. While driving Biruk’s car, Tsion negligently
injured another motorist when she failed to stop at red light. Biruk has a motor insurance
policy with a liability insurance limit of 250,000 birr per person for bodily injury liability.
Tsion has a similar motor insurance policy with a liability limit of 100,000 birr per person.
Required
If court awards a liability judgment of 100,000 birr against Tsion, how much, if any,
will each insurer pay?

Answer

If the court awards liability judgment, then there will be no payment made by the Tsion insurance
company, and all the payments of Br 100,000 will be made by the Biruk insurance company only.
As the liability judgment is awarded to Tsion and her limit is also Br 100,000 so her company will
not be liable to pay.

If the liability judgment is 300,000 birr, how much, if any, will each insurer pay?

Answer

In case of liability judgment of Br 300,000, then according to their respective limits, the major
liability is for Biruk to pay the compensation, so Br 250,000 will be paid by Biruk and the rest Br
50,000 will be paid by Tsion. As Biruk has a limit of Br 250,000, and Donna has a limit of Br

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100,000.
Assume that Biruk can’t afford to pay the premium and lets his Motor insurance
policy lapse. At the time of accident, he was uninsured. If the liability judgment
against Tsion is 100,000 birr, how much, if any, will Tsion’s insurer pay?

Answer

In this case Biruk has no insurance at the time of judgment, and the court has passed liability of
Br 100,000, so the complete amount can be paid by the Tsion insurance company as she has a limit
of up to Br 100,000 so she can pay this much amount, but anything beyond that cannot be paid by
her and her company.

3. Part IV
3.1. Nib Insurance Company
Make a visit in to one insurance company, request information about their insurance policy
checklist and prepare a report which addresses the various types of insurance policy that they offer.
A fair description should be given on the following insurance policies

3.2. Background
Nib Insurance Company (NIC) was established by 658 shareholders with an authorized capital of
Birr 50.0 million and a Paid-Up Capital of Birr 14.0 million in May 02, 2002 with 4 branches in
Addis Ababa and a total staff size of not more than 50. Currently, the paid up capital has reached
to Birr 250 million and the number of shareholders increased to 1,014. NIC provides both General
(Non-Life) Insurance and Life Assurance Services to its clients. The Company undertakes its
operations through its Head Office, 42 branches and 1 Contact Office (For the General Insurance)

Mission

To provide reliable and quality Insurance service and maximize its profitability, attain sustainable
growth, build its assets, invest and support the overall growth of the country.

Vision

To be a first class insurance company preferred by stakeholders for its quality and diversified
service.

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

 Is offered on a group basis such as employees of an organization.

 The policy is renewable annually
 Remains in force for one year and is then renewable for successive years.
 The amount of cover, called the sum assured, for each insured member (Employee)
under this policy is usually a multiple of the respective salary of the insured member
but it could also be a flat sum (such as birr 100,000) per insured member.
 The sum assured would be payable only in case of death of the insured member during
the term of the policy.
 If the insured survives to the end of the term of the policy, no benefit of any kind
would be payable and the policy will simply terminate or expire.

B. INDIVIDUAL TERM ASSURANCE

 Is offered on individual basis.
 The policy is renewable annually
 Remains in force for one year and is then renewable for successive years.
 The sum assured would be payable only in case of death of the insured person during the
term of the policy.
 If the insured survives to the end of the term of the policy, no benefit of any kind would be
payable and the policy will simply terminate or expire.
 The same explanation holds true for This Individual Term Assurance as for group term
assurance except that the policy is offered and underwritten on individual basis.
Individual health insurance coverage

C. Group life and Health insurance

A benefit policy intended to compensate the insured against accidental bodily injury or death. A
benefit policy intended to compensate the insured against accidental bodily injury or death and
directly occurred by violent, accidental, external and visible means and which injury shall be the
direct cause of death and disablement. Benefits are payable for:

 Death

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  Permanent Disablement Temporary
 Total Disablement
 Medical, surgical and hospital expenses in connection with an accident.
The GPA /PA insurance cover is a 24 hrs accident cover.

D. Engineering and construction insurance

Engineering insurance refers to the insurance that provides economic safeguard to the risks faced
by the ongoing construction project, installation project, and machines and equipment in project
operation.

It is all risk policy. It offers comprehensive and adequate protection against loss or damage in
respect to the contract works, construction plant and equipment as well as third party claims in
respect of property damage or bodily injury arising in connection with the execution of a
building/civil project. Main causes of losses identifiable under CAR are

 Fire
 Lightning and explosion
 Natural perils
 Theft Lack of skill

ERECTION ALL RISK (EAR) INSURANCE

This engineering insurance offers comprehensive and adequate protection against all risks
involved in the erection of machinery, plant and steel structures of any kind, as well as third party
claims in respect of property damage or bodily injury arising in connection with execution of an
erection project. EAR insurance provides a very wide cover. Almost any sudden and unforeseen
loss or damage occurring to property insure on the erection site during the period of insurance will
be indemnified.

MACHINERY BREAKDOWN INSURANCE

This is an insurance of contractor’s plant and machinery on annual bases. It covers any loss or
damage from any cause whatsoever occurring at work, at rest during maintenance operations and
is not limited to specific construction site. Main causes of losses identification under CPM policy
are:

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  Fire, lightning and explosion
 Natural perils Theft Lack of skill
 The cover doesn’t include third party legal liability unless it is incorporated in the
contractors all risk insurance.

ELECTRONIC EQUIPMENT INSURANCE (EEI)

It was developed grant industry effective insurance cover for plant, Machinery and mechanical
equipment at work, at rest or during maintenance operations. By its nature, Machinery Insurance
is “All Risks” insurance for machinery supplementing the coverage afforded by Fire Insurance.
Thus it covers unforeseen and sudden physical loss of or damage to the insured items necessitating
their repair or replacement. All type of machinery, plant, mechanical equipment and apparatus
may be covered under machinery insurance. If possible, all the machinery of plant or workshop or
of a separate plant section should be included in the insurance in order to insure that the risk is
adequately balanced. Only those items having a short service life compared to the entire plant are
normally excluded from machinery insurance i.e. mainly:
 All type of interchangeable tolls
 Sieves, engraved cylinders, stamps, dies, ropes, chains, belts
 Parts made of glass ceramic or wood, rubber tires
 Operating media of any kind such as fuel, gas, refrigerants, catalysts, liquid, lubricants (oil
in transformers and circuit breaks, however, included since breaks, however included since
it is not only a coolant but also serves as an insulation agent).
 Machinery insurance cover is limited to the insured’s premises and does not include Third
Party Liability and perils that could be catered in other policies unless specifically included
by endorsement. Loss or damage covered under Machinery insurance is mainly due to
 Faulty design Faults at work or in erection
 Defects in costing and material Faulty operation , lack of skill, negligence, malicious acts
 Tearing apart an account of centrifugal force
 Physical explosion, flue gas explosion in boilers
 Electric causes like short circuit
 Shortage of water in boilers
 Act of God

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BOILER AND PRESSURE VESSEL INSURANCE POLICY
 It comprises in the context of this insurance all electrical and electronic systems such as:
Electronic data processing (EDP) equipment
 Electrical equipment for medical use
 Communication facilities
 Equipment for research and material testing Electronic Equipment Insurance is “Accident”
insurance on an all-risk basis covering sudden and unforeseen losses which physically
affect the subject matter insured.

CONTRACTOR’S PLANT AND MACHINERY (CPM) INSURANCE:

This is an insurance of contractor’s plant and machinery on annual bases. It covers any loss or
damage from any cause whatsoever occurring at work, at rest during maintenance operations and
is not limited to specific construction site. Main causes of losses identification under CPM policy
are: Fire, lightning and explosion Natural peril Theft Lack of skill The cover doesn’t include third
party legal liability unless it is incorporated in the contractors all risk insurance.

E. Motor and home owners insurance

MOTOR COMPREHENSIVE

The insurance policy covers:

Accidental collision or overturning upon mechanical breakdown or wear and tear but excluding
damage to tires unless such insured motor vehicle is damaged at the same time.

Fire, external explosion, self-ignition, lightening, theft Malicious act Transit risk Impact damage
caused by failing objects Legal liability to third parties for bodily injury or death and damage to
property up to specified limit.

MOTOR B.S.G

This cover is extended under motor comprehensive insurance policy on payment of additional
premium. Covers: Fire, explosion, riots, strikes, civil commotions all arising out of the actions of
bandits and Guerrillas.

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 F. Bond insurances
Bond insurances are mainly given to cover failure of contractual agreement made between two or
more parties. The legal contract dealt with diwerent parties can fail due to various reasons.
Therefore, inorder to compensate the loser there must be a surety to cover the loss.
Worldwide there are more than 15 types of bond insurances. Ethiopian Insurance Corporation
currently provides seven types of bond insurances. Namely Performance, supply, bid, advance
payment, customs, maintenance & retention bonds. Hence, this brochure elaborates all these bond
insurances that the Corporation provides to its customers

If the contractor shall well and truly and faithfully comply with all terms, covenants and conditions
of the said contract, on its part to be kept and performed according to the tenor of the said contract;
if on default by the contractor the Surety shall satisfy and discharge the damage sustained by the
Employer thereby up to the sum agreed then this obligation shall be null and void otherwise it shall
remain in force and virtue;

 This bond is executed by the Surety upon the following express conditions which shall be
conditions precedent to the right of the Employer to recover hereunder. Provided always
that:
 upon the discovery by the employer or by the employer’s agent or representative of any act
or omission that shall or might involve a loss hereunder, the employer shall give immediate
written notice thereof with the fullest information obtainable at the time of the Surety at its
Head Once or Branch Once concerned;
 If the contractor shall fail to comply with the provisions of the contract to such an extent
that the contract shall be forfeited, the Surety shall have the right and opportunity to assume
the remainder of the contract and at its option to perform or sublet the same;
 In the event of any breach of the provisions of the contract, the Surety shall be subrogated
to all the rights and properties of the contractor arising out of the contract. All deferred
payments and all moneys and properties, that are then, or that may thereafter, become due
to the contractor under or by virtue of the contract shall be credited upon any claim that
employer may make upon the Surety.

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Reference
Alemayehu, F., & Teklemedhin, M. (2009). Law of Banking , Negotiable Instruments and
Insurance Teaching Material.

Bank, N., Reengineering, B. P., & Directorate, I. S. (n.d.). National Bank of Ethiopia Risk
Management Guideline for insurance Companies in Ethiopia. 1–49.

Gazeta, F. N. (2012). ነጋሪት ጋዜጣ. insurance-business-proclamation-1163-2019.pdf. (n.d.).

Meguire, P. (2007). College of Business and Economics. In Business, 632, 1–15.

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.143.8171&rep=rep1&t
ype=pdf

Sparrow, P. L. (2009). Chartered Secretaries – Southern Africa. 373, 2009.

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