Govt Plans Biggest Insurance Sector Shake Up in 25 Years To Bring Foreign Investment

The federal government has introduced the Insurance Bill 2026 in the National Assembly, proposing sweeping reforms aimed at modernizing Pakistan’s insurance sector, expanding digital services, and opening the market to foreign insurers.

The proposed legislation, prepared by the Securities and Exchange Commission of Pakistan, seeks to replace the Insurance Ordinance 2000, which has governed the sector for the past 25 years.

Under the proposed framework, insurance services are expected to become more digitalized through online onboarding, tech driven insurance products, simplified regulatory procedures, and faster claims processing mechanisms.

One of the most significant reforms in the bill is market liberalization, which would allow foreign insurers and reinsurers to operate in Pakistan through branch structures, potentially increasing competition and foreign investment in the sector.

The legislation also proposes perpetual licensing instead of periodic renewals, recognition of insurtech products, flexible intermediary structures, and expanded participation of the private sector in public property insurance.

The bill further introduces stronger consumer protection measures, including stricter claims handling timelines, safeguards against mis-selling, transparent dispute resolution systems, and enhanced solvency monitoring through a Risk-Based Capital framework.

Pakistan’s insurance sector has historically remained underdeveloped compared to regional peers, with low penetration rates, limited product innovation, and relatively weak public adoption of insurance services.

According to industry estimates, insurance penetration in Pakistan remains below 1 percent of GDP, significantly lower than in many regional economies, reflecting the sector’s limited scale despite Pakistan’s large population and growing financial services market.

The SECP has, in recent years, accelerated efforts to modernize Pakistan’s broader financial system through digital finance reforms, fintech regulation, digital licensing frameworks, and blockchain-related policy discussions.

SECP Chairman Dr. Kabir Ahmed Sidhu said the proposed law aims to improve insurance penetration by enabling affordable and digitally accessible insurance products for wider segments of society.