Interview with Mr Mahmood Lotia — Senior Deputy Managing Director, EFU General Insurance Limited
PAGE: Tell me something about yourself and your organization, please:
Mahmood Lotia: I am an Associate of the Chartered Insurance Institute of UK (ACII). I started my insurance career in April 1974 then trained at the M&G Reinsurance Company, UK. From April 1977, I worked with Adamjee Insurance Company Ltd and Commercial Union Assurance Pakistan Branch and overseas with Abu Dhabi National Insurance Company. On return to Pakistan in August 1991, joined EFU General Insurance Limited and currently I am in-charge of the company’s technical operations including underwriting, claims and reinsurance. I am also the Senior Deputy Managing Director. I have remained associated with the Insurance Association of Pakistan in various capacities since 1980 and served on nearly all technical committees. I was Chairman for the year 2014-2015 and currently a member of the Executive Committee. I am a certified director by PICG and currently a Director on the boards of EFU General Insurance Ltd and Allianz-EFU Health Insurance Ltd.
EFU General Insurance Ltd is Pakistan’s largest non-life insurer with premium income for 2017 over Rs 20 billion including Takaful. The company’s total assets on book value basis are Rs39 billion. The company was started in 1932 in Calcutta (now Kolkata) in pre-partition India and after Independence moved to Pakistan. Today the company writes all types of non-life insurance and its clients include the full range of industrial business as well as private airlines. The company leads in energy business including oil and gas and other exploration business. The company also is the major insurer to the power industry and amongst its clientele are included the main power construction and operational projects.
EFU is rated AA+ by JCR-VIS and PACRA. The company has strong financial base, with diversified investment portfolio comprising investments in equities, fixed income securities and also real-estate. EFU has two prominent buildings, one in Karachi and another in Lahore. Barring few offices in Karachi, all the offices are located in EFU House, Karachi whereas EFU House, Lahore is let out to prestigious national and international business houses.
PAGE: Your views on insurance sector of Pakistan:
Mahmood Lotia: The insurance business in Pakistan split between life and non-life both has participation by private as well as public sector entities. In the life sector, there is one major public sector corporation i.e. State Life Insurance Corporation of Pakistan and five other private sector life insurers. The major share of business is written by the State Life Insurance Corporation of around 50% market share. The non-life sector comprises of the National Insurance Company Ltd (state-owned direct insurer restricted to insuring public sector interests only). There are about 35 active private sector insurers. State-owned reinsurer Pakistan Reinsurance Company Ltd only writes reinsurance and under statutory provisions and are entitled to mandatory reinsurances as rights of first refusal.
The insurance sector is governed under the provision of the Insurance Ordinance 2000 and regulated by the Securities and Exchange Commission of Pakistan (SECP) (Insurance Division). There are some measures being taken by SECP for revisions of the Insurance Ordinance 2000 and drafts of the same have been discussed with the local industry.
PAGE: How would you comment on growth in conventional and Islamic insurance in Pakistan?
Mahmood Lotia: Takaful (Islamic insurance) in Pakistan had been in practice since 2005 as dedicated operators but no worthwhile expansion was seen. The revised Takaful Rules 2012 allowed the existing conventional insurers to operate windows and this materialized in 2015 onwards when a number of insurers commenced window operations. The figures of 2016 as compared to 2015 showed 80% increase and this was mainly handled by the window operations. The trend for 2017 is the same and it is expected that this will further increase. It is therefore a bit early to comment on the future of Takaful in Pakistan but based on the other markets internationally where both conventional and Takaful operate the Takaful business has not made any major inroads. For 2016 Takaful share of the total business was 6.2% in the non-life sector and 10% in the life sector. The conventional business for the same periods i.e. 2015 to 2016 showed an increase of only 13% in comparison. The business in 2017 is expected to be much higher as a number of China-Pakistan Economic Corridor (CPEC) projects materialized in 2017. As the total market figures for 2017 are not available at present hence review is based on 2015-2016. For the public sector as figures are not available we cannot comment on them.
PAGE: How could Pakistanis be convinced to opt for insurance products?
Mahmood Lotia: The spread of insurance amongst the public depends on disposable income, religious inhibitions, affordability of the product and awareness of insurance. The personal lines insurance business like individual home, health, motor and the like generally being low premiums are uneconomical to market and insurers in the absence of any major support from government who are hesitant to venture into this area. Some insurers do write in a very limited manner with some micro insurance business. The products itself due to the laws and regulations have to be segregated into their respective class and life and non-life being totally separate cannot be marketed as one product. Some relaxation is proposed in new laws but these have not as yet materialized.
PAGE: How could we lure foreign investment from across the world in this sector?
Mahmood Lotia: With regard to non-life insurance, it is felt that already there are more insurers than required. However, in the life sector there is room for new entrants as there is dearth of skilled personnel. Some foreign investment in this area i.e. life insurance have been seen and the fact that this is still a wide open market with good returns should be worthwhile for new investors.
PAGE: Your views on competition in insurance sector of Pakistan:
Mahmood Lotia: Competition is healthy for the business and generally improves the efficiency of the insurer thus benefiting to the consumer. The industry in Pakistan also similarly has healthy competition among each other and based on annual results, it is not seen for companies to be harming their figures in over competition.