Insurance industry came to a very low level between 1997 to 2000 and again picked up from 2001

Dec 06 - 12, 2004

The development of insurance industry is linked with the pace of economic and industrial development of the country. Back in the years 1960's to mid 1970 there was boom in all spheres of our country's economy, few to say setting up large industrial organization like the PIDC, Pakistan Steel Mills, Textile, Sugar, Cement, construction of Mangla Dam, Terbela Dam and in the recent years the Ghazi Barotha who constructed 52 km long channel to carry water of Indus River to Attock & Barotha. This whole period had provided opportunity to insurance companies to grow along. Unfortunately in the late 1990's the upsurge in international crisis due to increasing oil prices breakup of hostilities between Iran & Iraq resulted in the slowing down of construction activities and return of thousands of our work force from the Gulf states. This coupled with rising unemployment and growing law and order issues have seriously affected the insurance industry in our country. As a result the insurance industry came to a very low level between 1997 to 2000 and again picked up from 2001.

For readers knowledge I am placing the Annual Gross written premium in the private sector of non life insurance in the past eight years as under:

* 2003

: Rs. 15.30 Billion

* 2002

: Rs. 11.60 Billion

* 2001

: Rs. 13.80 Billion

* 2000

: Rs. 4.44 Billion

* 1999

: Rs. 6.07 Billion

* 1998

: Rs. 3.85 Billion

* 1997

: Rs. 4.43 Billion

* 1996

: Rs. 16.42% and earlier remained in two digits

Now that a democratic government is installed and burning issues relating to administration and politics resolved by the national assembly the investors are seeing prospects of stability in the country. The administrative steps taken by the government in the past 3 years have resulted in the tremendous rise in foreign exchange reserves, increased remittance from Pakistanis abroad through banking channels, privatization of state-owned business and recent favorable U turn in Pakistan and India relations. These will bring in a healthy and sound business environment in the country and insurance companies are hopeful to draw benefit in this scenario and growth in their business.


It is unfortunate that for a market size between Rs. 11 to Rs. 15 billion we have mushroom of insurance companies with as little as Rs. 50 mln paid up capital. Following the restructuring of insurance Act and introduction of Insurance Ordinance many of these Companies are finding it difficult to continue to operate as they are required to observe the statuary requirements laid down by the SECP under the Insurance Ordinance 2000 as under:-

1. Increasing the paid up capital to Rs. 80 mln by 31st December, 2004
2. Maintaining revised solvency margin
Raising statuory deposits

It is expected that with the advent of the year 2005 companies who have fulfilled the requirements will be few only and the rest will have closed down or amalgamated with others. The amalgamation or merger is found to be good and well tested as seen this happening successfully in the UK, and USA markets but so far not heard of any such move in our market although the deadline is not very far.

SECP stipulation that the reinsurance securities should be "A" rated is somewhat difficult for some insurance companies to comply because of their inability to develop relationship with sound reinsurers due to their little portfolio. Indeed it is encouraging that this stipulation is not vigorously followed and the companies are allowed to write treaties with reinsurers who have the financial capability to pay claims.

The Board of Investment Government of Pakistan in its website ( have announced names of 300 top companies in Pakistan which includes 9 insurance companies. This listing is based on the company's net worth. These companies are:



1. Adamjee Insurance Company

Rs. 1255.4 Mln

2. Central Insurance Company

Rs. 367.5 Mln

3. EFU General Insurance

Rs. 269.1 Mln

4. Premier Insurance

Rs. 205.7 Mln

5. East West Insurance

Rs. 150.0 Mln

6. Habib Insurance

Rs. 145.9 Mln

7. Reliance Insurance

Rs. 106.2 Mln

8. Century Insurance

Rs. 94.7 Mln

9. Askari General Insurance

Rs. 84.0 Mln


Upto 1990, the member companies of the Insurance Association of Pakistan have spiritually followed premium rate prescribed in the Fire, Marine, Motor & W.C. tariffs. Instances of deviation by some companies were noticed and regularly reported to Breaches Committee of the Association. Lack of co-operation, hegemony and indiscipline in the various committees of the Association has gradually reduced the effectiveness of this to a reference body and many companies have developed their internal manuals. Looking at it from the point of health and competition this is not bad as those who have well structured management, effective risk control, experienced professionals and above all consistent in business growth can afford to operate outside the ambit of tariffs.

In the recent past two years we have seen vast gulf emerging between the large, medium and low premium companies. The IAP is now reduced to the level of data office for compiling risk wise premium and claims figures in different market segments. The members can use this information to evolve strategy for future rates. Does this mean that we should do away with the various tariffs? As to my knowledge Pakistan is the only tariff regulated market in this part of the world. We can not compare our position with UK, USA, Middle East or Far Eastern Markets as insurers there have tremendous resources like, product development, financial strength and above all very effective corporate governance to protect policyholders and shareholders interest. Yes, we can do away with the tariffs and self regulate but have to demonstrate all such qualities as of the other markets.

The coming into folds of Insurance Ordinance 2000 and observance of corporate regulations of the SECP is first such move.


This ship and its grounding on 27th July, 2003 in Karachi near Keamari channel will be remembered in as an historical event in the 50 years history of Pakistan's Marine Insurance as the largest ever terms of insured value and the involvement of the international agencies like world fame Savors and London's leading Claim Settlement agent W.K. Webster. The ship had carried crude oil from the neighboring Iran Kharj Island. The whole of the transit was safe up to Karachi but for bad weather, heavy rains and few other unexplainable reasons the ship was grounded and in very short period of time had breaking signs which resulted in the slicking of oil into the sea up to Karachi's beaches Clifton / Sea View areas.

Central Insurance takes pride to have handled this large claim as lead insurer of Pakistan Refinery Limited who had imported the crude oil. This involved in number of issues like daily communication with London based Agent, the Greece Salvor, Solicitors in London and in Karachi, the London and local courts, State Bank of Pakistan and a number of other concerned departments. All this was handled very effectively by Central and other reinsurers who are part of the panel under the insurance policy.

Central Insurance and the panel insurers have satisfactorily concluded the settlement with the insured and the Salvor within record six months period. I wish to thank the Chief Executive and the Senior Executives of the panel insurance companies for their cooperation and time to time guidance in the handling of this Claim. Rizvi, Isa & Afridi Angell who acted as our solicitor are entitled to exceptional commendation in helping the final settlement.