January 31, 2003	Friday	Ziqa’ad 27, 1423

ISLAMABAD, Jan 30: Securities and Exchange Commission on Thursday notified the Code of Governance for insurance companies. The code is aimed at promoting good business practices and bring uniformity throughout the insurance industry in Pakistan.

It will take effect on March 1, 2003.

The initiative, according to official source, had been taken by the SECP as a regulatory authority for the insurance sector as provided in the Insurance Ordinance 2000, because it considered good governance was equally important for this sector as well as other sectors of the corporate world.

In the SECP’s view, it was essential to set a high standard of corporate structure for registered insurers with a view to strengthening the confidence of policyholders and encouraging the stable and long-term development of insurance industry in the country.

This would also go a long way towards enhancing the status of Pakistan as a regional financial market, he remarked.

Since assuming regulatory responsibilities of the insurance sector, the Securities and Exchange Commission has taken a number of measures focused on protection of policyholders’ interests and development of the insurance industry.

Developed along the lines of the Code of Corporate Governance for listed companies, the Code for insurance industry aims primarily at establishing a system whereby a

company is directed and controlled by its directors in accordance with the best practices to protect the interests of stakeholders including the policyholders.

It has been divided into eight sections: BOD, CFO and company secretary, corporate and financial reporting framework, auditors and actuaries not to hold shares, committees, internal audit, external auditors, compliance with the code of corporate governance for registered insurers.

The purpose of the code is to establish and enhance the integrity and general security of the insurance industry through assistance to registered insurers for the evaluation and formulation of their internal practices and procedures.

The code proposes to restructure the composition of board of directors in order to introduce broad-based representation of executive and non-executive directors.

Above all, the code emphasises openness and transparency in corporate affairs and the decision-making process, requiring the directors to discharge their fiduciary duties in a transparent, informed, diligent and timely manner.

The salient features of the code include setting up of committees on underwriting, claims settlement, reinsurance and co-insurance as well as audit committee, internal audit and control systems, mandatory rotation of auditors after five years, restriction on auditors as well as on appointed actuaries not to hold, purchase, sell or take any position in shares of the company.

The Securities and Exchange Commission was confident that, the source stated, the code would help achieve transparency, capacity-building and accountability in the insurance sector. “It is progressive in nature and can be reviewed in the light of changes in circumstances,” he asserted.