KARACHI (December 13 2003): Securities and Exchange Commission of Pakistan (SECP) Chairman Dr Tariq Hassan has identified that sound reinsurance is essential to reduce the risk of insurers and the companies should have adequate reinsurance arrangements in place.
He met the representatives of leading private sector life and non-life insurance companies in Karachi on Friday to discuss the issues being faced by the industry.
Participants of the meeting included CEOs and representatives of life and non-life insurance companies including Adamjee Insurance, EPU, New Jubilee, IGI, Premier Insurance, EFU Life, East-West Insurance, Muslim Insurance, Habib Insurance, Shaheen Insurance, Askari Insurance, CU Life, Reliance Insurance and New Hampshire and Royal Sun Alliance.
The SECP Chairman said the Commission had directed insurance companies operating in Pakistan to make sound reinsurance arrangements with at least 'A' rated international re-insurers.
The industry was advised to not only underwrite prudent risks but also to go in partnership with re-insurance companies with good international standing and rating.
Tariq also indicated that those insurance companies which fail to get satisfactory reinsurance arrangements would need to obtain claim paying rating from the credit rating agencies in the country.
He added that such comfort is necessary for safeguarding the risk to policyholders.
He also stressed the need for taking timely steps to improve capitalisation and solvency of insurance companies.
Another issue discussed during the course of the meeting was the treatment of administrative surcharge imposed by insurance companies and shown separately on policy documents.
The representatives of insurance industry requested that administrative surcharge should not be made part of the premium.
However, in accordance with the accounting regulation enforced by SECP under the new insurance rules, 'Any levy charged on premiums which is not an amount collected on behalf of a third party shall be considered to be part of premium'.
There is no evidence that the insurance companies around the world charge administrative surcharge separately.
The meeting also discussed wide-ranging issues including capacity building of the insurance institute, training of agents and the managerial staff of the insurance companies, insistence of banks on deposits from insurance companies and capital gain tax.
The participants were told that these issues were already receiving attention of SECP and would be resolved after consulting other stakeholders.
Dr Tariq said that he would hold another meeting of the remaining companies in the next four weeks.