The insurers will maintain assets in excess of
liabilities to meet solvency requirement as per this Ordinance.
Insurance companies will maintain adequate reinsurance arrangements.
The insurers will submit the quarterly returns on the
prescribed form to SECP. The auditors shall be appointed by the
commission to audit the accounts of insurer’s. Actuary report for life
insurance business shall be necessary. If any return is considered
inaccurate or defective the Commission can call for further information,
call upon insurer; examine any officer of insurer (or decline to accept
If an insurer is likely to become unable to meet
liabilities the commission can investigate the affairs of an insurer. If
necessary the services of an auditor or actuary can be hired for
investigation by the commission. The Commission has the power to
prescribe maximum level of acquisition costs and management expenses.
For corporatization of public sector insurance
corporation the National Insurance Corporation, has been converted and
registered as National Insurance Company Limited. The Pakistan Insurance
Corporation will be converted and registered as Pakistan Reinsurance
Company Limited. These Corporations will be converted into public
limited companies within a period of one year from the issuance of this
Ordinance. These will continue to conduct their present business until
the Federal Government ceases to hold a controlling ownership interest
There are provisions for appointment of agents and
brokers. The brokers should have obtained license from the commission.
The requirements of Paid-Up-Capital, statutory deposit professional
indemnity insurance and other matters are to be prescribed by the
Government for registration of brokers.
The Commission should license the persons acting as
insurance surveyors. A person can apply for a license after fulfilling
the following conditions:
* The person is a company with a prescribed minimum
* The person carries professional indemnity liabilities.
* The person should be a member of the approved professional
* The Person complies with the conditions to be prescribed.
In addition to Authorized the Commission will
register surveying Officers according to the prescribed procedure.
Special provisions have been laid down for protection
of policyholder’s interest. The Government of Pakistan will appoint
the insurance Tribunal and the Insurance Ombudsman. This Ordinance also
provides for appointment of administrator and winding-up of an insurer.
The penalties for offence against the Ordinance are also prescribed.
This ordinance has almost changed the insurance
structure of Pakistan. Wide-ranging powers have been granted to the
Federal Government and SECP. This will promote sound development of
insurance industry. New types of insurance will be introduced in the
country like credit Insurance and Crop Insurance etc. The culture of
Insurance Broker will be introduced in the market. The small insurance
companies may amalgamate with large companies or those may be converted
into broker houses.
The process of implementation of new insurance law is
very slow. In fact the new law is the outcome of the findings and
recommendations of the National Insurance Reforms Commission which
worked in 1988-89 and presented its reports in 1990. Under the Capital
Market Development Programme the ADB supported Pakistan and consultants
were engaged in 1997. The consultants presented the draft bill of
Insurance Act, 1999 in July 1999. At lasts on 19th August 2000 the
President of Pakistan Promulgated the Insurance Ordinance, 2000
repealing the Insurance Act, 1938.
Almost all the sections of this ordinance are to be
implemented by forming insurance Rules and Regulations. For this purpose
the Federal Government and SECP have been given wide-ranging powers. The
Federal Government through notification published in the official
gazette, can make rules to carry out the purpose of this ordinance. The
powers of the Federal Government have been delegated to SECP who can
make rules required to be made under the ordinance. The SECP has also
been authorized to make Insurance Regulations required for
implementation of this Ordinance.
The formation of Insurance Rules and Regulations are
necessary to implement the Insurance ordinance 2000 in letter and
spirit. The SECP has published in Gazette of Pakistan a Draft
Notification in February 2002 with the title of "Draft Insurance
Rules, 2002" for information of all persons likely to be affected
and notice has been given that these draft Rules shall be taken into
consideration after 30 days of its publication in the official Gazette.
The SECP will consider any objection or suggestion received from any
person in respect of this draft before expiry of the said period.
Draft Insurance Rules although have been prepared and
hoped to be finalized and implemented within a period of one month.
However still the Insurance Regulations are required to be made.
In the recent past the economic environment for trade
and industry was sluggish, unemployment was on rise, inflation and price
spiral was soaring, exports were stagnant, imports were rising and
number of sick industries was shooting up. In such conditions the stock
markets of the country were not attracting investments both foreign and
local. So, it was difficult for insurance companies to generate further
On analysis of 39 insurance companies registered at
Karachi Stock Exchange, only 9 companies have the capital more than the
amount required as per Insurance Ordinance, 2000. There are other 22
companies, which have Paid-up Capital as required for brokers. Ihese
companies can easily convert themselves into brokerage houses or they
can also make mergers.
However, now the economic environment of the country
is changing. The foreign exchange remittances have been increased and
the exchange rates have been stabilized. The sick industries are being
revived through CIRC (corporate and Industrial Restructuring
Corporation). The public and private sectors are expected to be involved
in the reconstruction of Afghanistan. The Motorway and other highway
projects are being completed. The construction of the third seaport at
Gwadar has also been started. Foreign investments are also anticipated.
These economic activities will obviously generate
business for insurance companies. To meet the future requirements of the
country the following suggestions are made:
The Insurance Ordinance 2000 should be implemented completely. For this
purpose the new Insurance Rules and Regulations should be finalized and
enforced in the country without further delay.
New reinsurance companies should be established in the private sector to
increase the capacity for retention of more and more business within the
Establishing R&D division under the IAP should carry out the
Research and Development work.
provide sound and prudent management for insurance companies technically
qualified and professional people should be employed. The Insurance
Institutes should be reactivated. The Associationship and Fellowship of
Chartered Insurance Institute, London and Chartered Property and
Causality Underwriters, USA must be recognized as the basic
qualification for sound and prudent management of insurance companies.
per WTO requirement there should be no restrictions to market access.
For this purpose the foreign insurers and reinsurers should be
encouraged to come and invest in Pakistan. With broad equity basis our
insurance Companies will be fully competent to compete with them.
The surveyors having technical qualification should only be allowed to
join this profession so that quality work could be provided the limit
for settlement of claims on self-assess-ment basis should not be more
than Rs. 5,000 to Rs. 10,000.
All the hisurance companies should jointly create awareness among
general public about the essential requirement of insurance in the
day-to-day life of each individual and business houses.
it is very expensive for Pakistani people to get training and higher
education from U.K. and U.S.A., our own public and private educational
institutions should take initiative to provide higher education in
insurance. However much of the burden lies on the shoulders of Pakistan
Insurance Institute to start its own recognized professional insurance