KARACHI (January 02 2003) : The Securities and Exchange Commission of Pakistan (SECP) has directed 12 insurance companies to cease their underwriting insurance business forthwith as they failed to increase their paid-up capital to a minimum of Rs 50 million.
The SECP said that out of 48 insurance companies operating in Pakistan 36 fulfilled the statutory requirement of raising their paid-up capital to a minimum of Rs 50 million by December 31, 2002.
The new insurance law, ie Insurance Ordinance, 2000, promulgated in August 2000, as a result of insurance sector reforms, empowered the SECP to regulate insurance business in the country.
The new law has been introduced to regulate the business of the insurance industry, with the prime objective of ensuring protection of the interests of policyholders.
In this connection the foremost task in hand was to improve and strengthen the capital base of the general insurance companies to enhance their 'claim paying ability'.
Under the law, these companies were required to raise their paid up capital to Rs 50 million by December 31, 2002.
Almost 92 percent of insurance business in the country is with the 36 companies which have complied with the directive, and the Commission feels that these can largely and satisfactorily serve the interest of the public in Pakistan.
The remaining 12 insurance companies, which are mostly small entities, failed to comply with this pivotal statutory requirement despite a lapse of more than 28 months, provided to meet the requirement.
Under section 11 (1) clause (a), the insurer registered under the Insurance Ordinance shall at all times ensure that the provisions of the said Ordinance relating to minimum paid up capital requirement are complied with.
To ensure compliance with this, the SECP under the Insurance Ordinance has been empowered to issue direction to cease entering into new contracts of insurance, if an insurer has failed to comply with the condition of registration set out in section 11, which inter-alia include paid up capital requirement, mentioned above.
The Commission in exercise of the power conferred under the Insurance Ordinance, 2000, Wednesday directed these 12 companies to cease underwriting insurance business in the country, for not complying with the paid-up capital requirements.
The companies are Delta Insurance Co, Ittefaq Insurance Co, Jupiter Insurance Co, Platinum Insurance Co, Prime Insurance Co, Raja Insurance Co, National General Insurance Co, Gulf Insurance Co, Pakistan Guarantee Insurance Co, Credit Insurance Co, Dadabhoy Insurance Co, and Union Insurance Co.