KARACHI, Dec 24: A meeting of the Central Committee of the Insurance Association of Pakistan (IAP) on Monday discussed the issue of the proposed Rs750 million reinsurance pool but failed to reach any conclusion.
“There was no direction of the discussion itself what to talk of reaching any conclusion,” a participant of the meeting and one of the leaders of the insurance industry informed Dawn by telephone on Monday.
With business environment of South Asia getting murkier every passing day, because of the mounting tension between Pakistan and India, the traders and insurance operators are getting restive and nervous. It is apparently normal now but future remains unpredictable. None wants to offer any ‘on the record’ comment but they speak privately of their fears. “With no political risk cover, the business with overseas traders may become difficult,” a businessman said.
There is a pressing demand that the government should take the responsibility of providing protection against terrorism. “It is the constitutional obligation of every government to provide protection against terrorism,” an executive of an insurance company said. He said that insurance covers business risks but no where in the world it covers terrorism related cover.
“What is terrorism,” is another question that now is being discussed in the insurance and business circles. Insurance circles want the government to define terrorism.
None of the insurance companies have so far informed their clients of the fact that terrorism cover will not be available after a week.
Insurance companies are now waiting for the release of operational details and working plan of the proposed Rs750 million reinsurance pool fund for which a Technical Committee has been formed. This Committee has not been able to come out with any working plan till Monday. Now only a week is left to expiry of deadline set by the foreign reinsurers to stop providing terrorism cover to Pakistani insurance companies.
The Task Force has spelt out broad outlines of the proposed Rs750 million reinsurance pool fund for which the government has made an announcement of providing Rs500 million. No notification has been issued as yet on the institution of this Fund.
Reports emerging from Islamabad suggests that the Commerce Ministry wants to have a close look at the proposal of reinsurance pool fund before granting it a formal approval.
The Securities and Exchange Commission of Pakistan (SECP) initiated the proposal of a Task Force last month to set up a reinsurance pool fund of Rs750 million. This fund is designed to provide terrorism related risks cover to the Pakistani insurance companies after January 1 next.
Private insurance companies are now in a fix. Insurance operators had themselves approached the government in October to inform that their foreign reinsurer partners are pulling cover of terrorism cover from next year. In response, the Chairman of the SECP held a meeting on October 16 with the representatives of insurance industry and formed a Task Force.
In mid-November, the Task Force, with the blessing of the
SECP, unfolded its plan of instituting a Rs750 million to reinsurance pool fund to provide terrorism cover. Initial working details of this Fund say that participation is voluntary. But any company that joins this Fund will have to place all its business at the disposal of this Fund.
The premia rates worked out by the Task Force are being considered unrealistic and inaccurate. Before the promulgation of Insurance Ordinance 2000, the IAP worked out the premia tariff of all the insurance business.
The promulgation of the ordinance has triggered a cut throat competition which has brought down the premium rates of all insurance business—motor business, fire and marine.
