The Securities and Exchange Commission of Pakistan (SECP) has proposed amendments to the Credit and Suretyship (Conduct of Business) Rules, 2018 for the insurance sector, said a statement released by the SECP.
The draft amendments have been placed on the SECP’s website for eliciting public opinion, it added.
The main objective of the amendments is to delink the requirement of collateral under the rules from the reinsurance. This measure aims to facilitate the insurance industry in increasing local retention of insurance risks
Since the reinsurance business is based abroad, the local businesses pay a premium to foreign companies for reinsurance.
Earlier, during the stakeholders’ consultation session, it was pointed out that the rules require procuring of collateral on guarantees/bonds of an amount equivalent to 80% of the sum insured less reinsurance. This has led to a reduction of business and lessening of retention on credit and suretyship business, as most of the insurance sector tends to park its risk in the reinsurance business.
Therefore, to facilitate industry, SECP has proposed amendments in the rules to delink the collateral requirement from reinsurance.