ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has proposed a draft amendments to the Rule 35 of the 2002 Securities and Exchange Commission (Insurance) Rules by rectifying the issue of outstanding insurance premium, faced by the insurance industry due to its provisions, which relates to the payment of premiums by the policyholders to insurers.
The proposed amendments have been published in the official gazette of Pakistan to elicit public comments.
In order to strike a balance between the interests of policyholders and insurers, the SECP has proposed to replace the provisions of the existing Rule 35 with a new rule as a prudent method of market practice, to be named as “Manner of Receipt of Premium and Claims Payment”.
Currently, the figures for the premium receivable by the insurers show huge outstanding amounts with high potential of default, which is also posing a large systemic threat, especially to the solvency of the insurers and generally to the financial strength of the insurance industry.
This phenomenon also seems abnormal when compared with the practices in comparable jurisdictions. For example, in India, the total outstanding premium of the industry is not more than 2%, as compared to 21% in Pakistan, of the total premium.
Mohammed Asif Arif, the Commissioner of Insurance at the SECP, said that with this move the insurance industry in Pakistan would become stable in financial terms. He further added that this would also lead to the overall protection of policyholders and further development of local insurance industry.
Any comments on the proposed amendments may be provided to the SECP by March 1.