Presenter: Amara Gondal

October 07, 2011

PACRA’s Knowledge SessionRegulator’s role in insurance industry

of Pakistan

SECP and insurance in Pakistan

• 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. Companies Ordinance-1984, 2. Insurance Ordinance-2000, 3. SEC Insurance Rules2002, 4. Federal Gov. Insurance Rules -2002, 5. Takaful Rules-2005, 6. Companies (Issue of Capital) Rules1996, 7. Companies Share Capital (Variation in Rights & Privileges) Rules-20008. International Accounting and Financial Reporting Standards

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Restructuring of SECP – insurance division

• Chairman SECP Insurance division – Muhammad Ali• Restructuring of the division

Insurance division

Policy, Regulation

and Development

Supervision

• On- Site Inspections• Off-Site surveillance• Enforcement

• Policy reforms

• Registration• Reinsurance• Litigation• Advisory

Hiring of professionals

chartered accountants, cost and management accountants, MBAs, lawyers and experienced insurance professionals

•MBA from IBA Khi•In 1994 finalized JV with WI Carr Securities, Asian Brokerage arm of Credit Agricole Indosueze, lead for Pakistan for 6 years•He made it the best and largest brokerage house in Pkistan•Ex-Director – Engro, KSE, etc.

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

7 life insurers

5 Takaful operators (2 life)

Below 1% GDP penetration

64% market share with three companies (April10-Mar11)

~21% growth in last one decade (PKR 38bln or USD 434mln)

24 non-life insurers

23 life insurers

–

~7% GDP penetration

45% market share with three companies (Jan10-Dec10)

~15-20% growth in last one decade (INR 426bln or USD 85bln)

THANK YOU