The Securities and Exchange Commission of Pakistan (SECP) has approved the draft Insurance Bill, 2017, which has been sent to the Ministry of Finance (MoF) for its onward submission to the Ministry of Commerce to start the necessary legislative process.
The Bill was tasked to formulate significant reforms in the insurance regulatory framework to bring it on a par with the international standards and to ensure development of financially sound insurance sector where interests of policyholders are protected.
The draft Insurance Bill is now finally formulated through extensive public consultations and due legal process.
The proposed reforms were presented to the Finance Minister in October 2016, and on his advice, the concept note on proposed significant reforms was shared with the industry stakeholders through the consultation sessions conducted in three major cities of Pakistan.
Thereafter, the proposed framework was transformed in the form of draft Insurance Bill, which was issued for eliciting public opinion on December 28, 2016.
A large number of comments were received from various stakeholders such as insurance companies, insurance brokers, associations of insurance surveyors, Pakistan Societies of Actuaries and the Institute of Chartered Accountants of Pakistan.
Subsequent consultation sessions were also conducted to discuss significant reforms proposed through the draft Insurance Bill. Based on the public comments and post-comments consultation sessions, the draft Bill was revised to make it more conducive for prevalent market dynamics without compromising on the spirit of reforms.
The salient proposed reforms include introduction of dedicated microinsurers, enabling provision for introduction of risk-based supervision framework (risk-based capital and risk-based solvency margin), provisions for regulation of takaful and retakaful, regulation of local and foreign reinsurance business for enhancement of local capacity, regulation of reinsurance brokers, flexibility for introduction of new intermediaries, introduction of concept of web aggregators, insurance repository, requirement of “appointed actuary” and product filing for non-life insurance.
The proposed Bill aims to create conducive regulatory environment to encourage market development, strengthen the regulatory framework to ensure alignment with the Insurance Core Principles (ICP) of the International Association of Insurance Supervisors (IAIS), address entity specific and systemic risks by phased shift towards risk-based supervision regime and to address the regulatory gaps in existing law.