PACRA’s Knowledge Session
Regulator’s role in insurance industry
of Pakistan
Presenter: Amara Gondal
October 07, 2011
SECP and insurance in Pakistan
Insurance specific
• The Securities and Exchange Commission of Pakistan has been regulating the
Insurance industry, since January 2001
• It took over from the Controller of Insurance operating under Ministry of Commerce,
Government of Pakistan.
• The SECP regulates and monitors the Insurance Sector in the country through powers
vested in the Insurance Ordinance, 2000 and the Companies Ordinance, 1984.
• SECP basically monitors the compliance with the
1.
2.
3.
4.
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6.
7.
8.
Companies Ordinance-1984,
Insurance Ordinance-2000,
SEC Insurance Rules2002,
Federal Gov. Insurance Rules -2002,
Takaful Rules-2005,
Companies (Issue of Capital) Rules1996,
Companies Share Capital (Variation in Rights & Privileges) Rules-2000
International Accounting and Financial Reporting Standards
Restructuring of SECP – insurance division
• Chairman SECP Insurance division – Muhammad Ali
• Restructuring of the division
•MBA from IBA Khi
Insurance
•In 1994 finalized
JV with WI Carr
division
Securities, Asian Brokerage arm of
Credit Agricole Indosueze, lead for
• Policy
Pakistan for 6 years
reforms
Policy,
•He made it the best and largest
• Registration
Regulation
Supervision
• Reinsurance
brokerage
house
in
Pkistan
and
• Litigation
•Ex-Director – Engro, KSE, etc.
Development
• Advisory
Hiring of professionals
chartered accountants, cost and management accountants, MBAs, lawyers and
experienced insurance professionals
• On- Site Inspections
• Off-Site surveillance
• Enforcement
SECP’s contribution in insurance
development
• Since 2000, insurance witnessed growth of 21% Vs. 14% growth prior
to the SECP
• SECP has been the member of the International Association of
insurance Supervisors (IAIS) since 2004. The SECP will soon be doing
a self-assessment of the sector to ensure compliance with IAIS
standards and best practices.
• Insurance Ordinance, 2000
 Minimum paid-up capital requirements
 Minimum solvency requirements with the commensuration of risk
 Minimum statutory deposit requirements for the policyholders’ protection.
• Tax anomalies affecting the insurance companies has been resolved
• Establishment of the ombudsman office
• Takaful rules, Bancassurance guidelines, life insurance illustration
guidelines, IFRS-4 implementation
SECP’s role in developing insurance
manpower
• The SECP has an in-house H.R. and training department, engaged in
organization-wide development of the employees of the SECP
• arranging few training workshops in certain critical areas of business
including corporate governance, anti-money laundering, etc.
• A few options for insurance awareness programs are also being
explored
• The 'Fit and proper' criteria for the sound and prudent management of
insurance companies.
• Fit and proper person
 Certain qualifications prescribed for insurance agents
 New requirements – certifications
 The Pakistan Insurance Institute
 The Institute of Capital Markets
Developments in pipeline
•
•
•
•
new solvency rules
`Fit and Proper' criteria for Management of Insurance companies.
Development of Unit-linked/ Products Regulations.
Other recent initiatives taken by the SECP to increase the penetration
include development of
• micro insurance regulations
• Terrorism Insurance Pool
• New takaful rules. The Takaful Rules, 2005 are being reviewed
and modified to remove anomalies and to address the areas which
are silent in the existing Takaful Rules. A new set of Takaful
Rules is being formulated and will be issued shortly.
• FIF (1%) was to be spent on research activities, now the matter is being
taken up
Insurance penetration | need to
change the business model
• Use of technology – web-based system
 Instant policy issuance and renewal through their websites for all retail
insurance products including car insurance, health insurance, travel insurance,
etc.
 Multiple payment options available including internet banking, credit card,
debit card, etc.
 These web-based systems to meet all pre and post-policy transactional needs of
its customers.
 One can compare plans, get quotes, buy, renew and keep a track of their
insurance policies online.
• use of multi-channel approach to sales, service and other allied activities
• Bancassurance can be utilized for the distribution of insurance products through a
bank’s network with tie-ups with various banks
• a team of product managers, sales managers and sales executives to sell, cross-sell and
up-sel1 its products
Regulatory environment in India
The Insurance Regulatory and Development Authority (IRDA)
• Reopening of insurance had begun in early 1990, the Govt. Set up a
committee in 1993 under the headship of former Governor of RBI to
propose reforms in the insurance sector.
• After submission of report in 1994, the foreign investors were allowed
to invest in floating companies (JVs).
• In 2000 IRDA was incorporated as an autonomous body to regulate and
develop the insurance industry.
• Key objectives: promotion of competition so as to enhance the customer
satisfaction through increased consumer choice and lower premiums,
while ensuring the financial security of the insurance market.
• Since 2000, IRDA framed various regulations ranging from registration
of companies to protection of policyholders’ interests.
Pakistan
India
36 non-life insurers
24 non-life insurers
7 life insurers
23 life insurers
5 Takaful operators (2 life)
–
Below 1% GDP penetration
~7% GDP penetration
64% market share with three
companies (April10-Mar11)
45% market share with
companies (Jan10-Dec10)
~21% growth in last one
decade (PKR 38bln or USD 434mln)
~15-20% growth in last one decade
(INR 426bln or USD 85bln)
three
THANK YOU