Home / This Week / Cover Stories / Pakistan Reinsurance Company Ltd: An overview

Pakistan Reinsurance Company Ltd: An overview

GENERAL INFORMATION

Pakistan Reinsurance Company Limited (PRCL) is a public sector company under the administrative control of the Ministry of Commerce. The company is headed by a Chairman with a nine member Board of Directors. Seven members of this Board are nominated by the Federal Government while others are elected from the business community enjoying excellent business credentials. In addition, the management is supported by a strong team of professionals who handle the business affairs of the company.

COMPANY’S ROLE IN ECONOMIC DEVELOPMENT

The role of PRCL in economic development of Pakistan is significant. Its awareness of increasing requirements of insurance and reinsurance of a progressive economy is making great efforts in coming up to national expectations. This progress signifies the consolidation of the position, both at home and abroad, encouraging further expansion.

The voluntary cession to PRCL provides attractive and competitive terms to the local insurance companies.

ECONOMIC OVERVIEW:

Pakistan’s economy continues to maintain its growth momentum for the third year in a row with real GDP growing at 4.71 percent in fiscal year 2016, which is the highest in eight years. GDP posted a reasonable growth over last year despite a major setback in agriculture growth on account of massive decline in cotton production.

However, the loss to some extent is compensated by remarkable growth in industrial and services sector as both these sectors crossed their targets growth, while other key macroeconomic indicators like inflation, fiscal and current account balance recorded improvement.

HISTORY OF PRCL

PRCL was established in 1952 as Pakistan Insurance Corporation under PlC Act 1952 in order to support local insurance industry. Since then it has managed National Insurance Fund (NIF), National Coinsurance Scheme (NCS), War Risks Insurance (WRI) and Export Credit Guarantee Scheme (ECGS) providing help in different forms to the insurance as well as business community.

In the year 2000, Pakistan Insurance Corporation was converted and incorporated as a public limited company into Pakistan Reinsurance Company Limited. The company was formed with a view to take over all assets and liabilities of Pakistan Insurance Corporation. Accordingly, it took over assets and liabilities of PlC on 15th February 2001 in pursuance of Ministry of Commerce SRO No.98(1)/2000 which was issued under the President ordinance No. XXXVI of 2000 14th February, 2001.

VISION:

PRCL’s vision is to be a leading provider of reinsurance and risk management services in the region.

COMMITMENT:

Provide clients and particularly insurance companies in Pakistan, with comprehensive insurance, reinsurance, financial and business services of highest quality and value. Maintain financial strength and stability through prudent business decisions and sound operations based on state-of-the-art information technology.

CONTRIBUTION TO NATIONAL EXCHEQUER:

Company contributed an amount of Rs552.809 million into the government treasury on account of taxes, levies and other duties.

INTERNATIONAL COOPERATION/BUSINESS RELATIONS

Pakistan Reinsurance Company Limited is actively collaborating and participating with its international counterparts in the field of insurance and reinsurance. This is being achieved under the aegis of Economic Cooperation Organization (ECO) with the object of reducing the outflow of foreign exchange and improving the standard of insurance and reinsurance services in the region.

PRCL being a progressive entity always keeps itself engaged by being actively part of major international forums and platforms. It actively participates in international forums such as Economic Cooperation Organization (ECO) and Federation of Afro-Asian Insurer and Reinsurer (FAIR).

The objective of this collaboration is to reduce the outflow of foreign exchange and improve the statements of insurance and reinsurance services in the Region. PRCL is also one of the pioneering and founding members of (FAIR).

BUSINESS OVERVIEW

PRCL operates in the following departments to conduct its business:

  • Fire
  • Marine
  • Engineering
  • Accident
  • Aviation
  • Treaty & Business Development department Services

It is mandatory for PRCL to accept suitable percentage of reinsurance business from the general insurance companies operating in Pakistan for whom it is obligatory to offer at least 35 percent of their surplus to PRCL.

COMPANY’S PERFORMANCE

PRCL was converted into a company in the year 2001 and is now operating under Insurance Ordinance, 2000, and Companies Ordinance, 1984. The Company is the Sole Re-insurer in the country.

AUTHORIZED CAPITAL:

A number of steps to run it on commercial lines have already been taken. Authorized Capital has been enhanced from Rs4 billion to Rs25 billion and Paid-up Capital from Rs540 million to Rs3 billion with a view to strengthen the equity base as the company has been planning to expand locally as well as internationally.

PRCL has continuously been trying through strategic and concerted efforts to avoid outflow of foreign exchange from the country and improve the performance of insurance sector in Pakistan.

BUSINESS STRATEGY:

The Company’s business strategy would continue to focus on providing prompt services to insurance companies with reference to facultative business.

UNDERWRITTEN:

During the period under review, Company has underwritten Rs8, 807 million as compared to Rs8, 135 million in the year ended December 31, 2015.

NET PREMIUM:

During the period under review, the net premium of the Company was Rs5,802 million showing an increase of Rs583 million (11 percent) over the corresponding year. This was mainly due to acceptance of more business from local insurance companies.

COMMISSION EXPENSES:

The commission expenses of the company during the year ended December 31, 2016 were Rs1,264 million as compared to Rs1,101 million during the year December 31, 2015, showing an increase of Rs163 million (15 percent) due to increase in business.

NET CLAIMS:

Net claims of the company for the year 2016 were Rs3, 336 million as compared to Rs2, 775 million in the year ended December 31, 2015 showing an increase of Rs561 million (20 percent).

INVESTMENT INCOME:

The investment income in the year 2016 was Rs961 million as compared to Rs935 million in the year 2015.

PROFIT-AFTER-TAX:

During the fiscal year 2016, the profit-after-tax is Rs974 million as compared to Rs1, 377 million of last year, showing decrease of Rs403 million.

PROPOSED DIVIDEND:

The Board of Directors proposed a Cash dividend of Rs3.00 per share (30%) subject to the approval of shareholders.

EARNING PER SHARE:

The earnings per share of the Company were Rs3.25 for the year 2016 as compared to Rs4.59 in the year 2015.

CREDIT RATING

M/s. PACRA Credit Rating Company Limited has recently reaffirmed the Insurer Financial Strength (IFS) rating of Pakistan Reinsurance Company Limited at ‘AA’ (Double A). Outlook on the assigned rating has also been maintained as ‘Stable’.

INFORMATION TECHNOLOGY

The company is fully aware of the importance of information technology and undertaken to implement ERP for which initial work has been started. In the interim period existing network was upgraded and disaster recovery plan is under implementation.

CORPORATE SOCIAL RESPONSIBILITY

The Company had in place a welfare fund to provide welfare facilities to its employees whereby 5 employees are sent for Hajj every year.

Besides, cash awards to the Employees’ Children who are Hafiz–e-Quran and secure A-I grade in Secondary Education and Higher Education, retirement grants to the retiring employees having long association with the company, burial and compensation packages for family of employees who die during service. To encourage healthy activities in house sports and recreation facilities are also provided.

BOARD STRUCTURE AND COMMITTEES

The Board structure is in accordance with the Code of Corporate Governance 2012, Public Sector Companies (Code of Corporate Governance) Rules, 2013 and Code of Corporate Governance for Insurers, 2016, issued by the Securities and Exchange Commission of Pakistan.

In order to ensure effective implementation of sound internal control system and compliance with the Code of Corporate Governance, the Board has constituted various committees which are ten (10) in number.

FUTURE PROSPECTS

In order to achieve the company’s short and long term objectives, its business strategy will continue to focus on providing prompt service to insurance companies particularly with reference to facultative offers. PRCL with strengthened balance sheet and enhanced equity structure will continue to concentrate on quality treaty, facultative business and profitable retrocession by gradually increasing its retention capacity and adoption of risk management measures.

WINDOW RE-TAKAFUL OPERATION

Takaful, the Islamic alternative to conventional insurance has grown from a regional business to a global one, over the past five years. The gross Takaful contributions nearly doubled during this period.

The Takaful industry worldwide has enjoyed growth rates between 15 percent and 20 percent, which is much higher than the worldwide growth observed for conventional insurance.

According to the annual results of 2015, the market share of Takaful by gross contributions in the industry is around 5 percent. With only three dedicated General Takaful companies present in the industry having a complete monopoly on Takaful for over 7 years, the penetration of Takaful is still limited.

The entrance of the window Takaful operators in Pakistan has continuously been demanding a local Re-Takaful operator because the Takaful Rules place a condition that the Takaful business can only be ceded to the Re-Takaful Operators whereas no such local Re-Takaful operator is available in Pakistan.

Due to this condition and absence of any local Re-Takaful operator, many foreign Re-Takaful operators are taking advantage of the current situation and they have entered into the market and got all the business from Pakistan upon their own monopolistic terms and conditions.

In view of this continuous market loss, the PRCL has initiated the exercise to establish a Window Retakaful function in the Company. This plan has been approved by the PRCL Board of Directors in its 118th meeting held on 2nd December, 2016. Consequently approval from shareholders has been obtained in the Extraordinary General Meeting held on 31-12-2016. The rest of the operational steps are actively in process and will hopefully completed by the end of half year.

Check Also

Expanding digital economy is not a threat to workforce of today

Expanding digital economy is not a threat to workforce of today

It is the general belief that fast advancement in technology is adversely impacting employment level …

Leave a Reply