KARACHI, Jan 2: The insurance industry in Pakistan has remained affected from external dynamics and has failed to earn any substantial gains for the shareholders, a report prepared by stock brokerage firm, IP Securities said.

Overall the sector listed at the Karachi Stock Exchange posted a loss of Rs63 million during the year 2001. The major setback for the insurance industry came from Adamjee Insurance that had reported a loss of Rs499 million in financial year 2001.

“However, the nine months results show an improved outlook as the company has managed to report an earning per share (EPS) of Rs1.83 during the period,” analysts said.

On Wednesday, the SECP barred 12 companies from doing business as they had failed to increase their paid-up capital up to Rs50 million. By the deadline of December 31, 2002, non-life insurance companies were required to raise their paid-up capital to Rs50 million and life insurance companies to Rs100 million. Including the 12 barred from operations on Wednesday, there were more than 50 companies operating in the insurance sector in Pakistan. Of those, 36 were listed on the KSE. Excepting possibly Adamjee; Commercial Union, New Jubilee and some limited activity in Premier, Askari and EFU, most other companies on the insurance sector have been fairly inactive.

During the year 2002, many of the companies such as Union, Pakistan Reinsurance, Askari General had issued right and bonus shares to comply with the minimum capital requirement. Asia Insurance and Indus Insurance had decided to amalgamate, while New Jubilee Insurance had acquired Commercial Union, which also was a feasible step towards getting additional capital and technical expertise for the company.

Analysts believed that the insurance business had suffered on account of lack of awareness and limited efforts on developing the insurance culture, and the growth had remained inhibited due to the lack of any innovative ideas on that front. The dismal conditions of the sector were aggravated as a result of events of September 11, 2001, following which several business houses suffered huge losses and the brunt of the blow was taken by the industry as the international companies stopped providing reinsurance cover to the insurance companies in Pakistan.