18 January 2004	Sunday	25 Ziqa'ad 1424

KARACHI, Jan 17: As many as half a dozen top private general insurance companies of Pakistan are offering terrorism cover business without getting any arrangement from the international reinsurance companies.

This fact was brought to the knowledge of the Chairman of the Securities and Exchange Commission of Pakistan (SECP) Tariq Hasan by top and senior executives of more than 15 so-called small general insurance companies on Friday.

"So far there have been only loss of life in the reported cases of terrorism in Pakistan and the loss of property has been relatively much less," an executive of a small insurance company is reported to have informed the SECP Chairman on Friday.

Insurance operators fear the day when any terrorist act would cause big loss of life and massive damage to the property that could render one or more big general insurance companies literally bankrupt. "God forbids such an incident would give fatal blow to the insurance business itself in Pakistan," an insurance executive remarked.

A few insurance companies are reported to have offered as much as Rs100 million and even more for covering accidents and damages from unforeseen incidents without getting any reinsurance cover.

Pakistan's insurance sector has not been able to grapple all such issues because the insurance sector is now polarised between the small and big companies, which has virtually given a death blow to the Insurance Association of Pakistan (IACP). The big insurance companies which claim to obtain 5 per cent and more of the premium business are not ready to sit with their colleagues in general insurance business whose level of business is relatively small. Only three companies in Pakistan generate 5 per cent and more of the Rs14 billion annual insurance business.

There are about 10 others who generate one per cent and more of the insurance business and have also opted to stay aloof from more than 35 companies which are considered small and share among themselves hardly Rs1.5 billion insurance business.

The SECP Chairman held a meeting with the sponsors of big insurance companies in December to emphasise upon them the importance of getting reinsurance arrangement from 'A' rated reinsurance companies. On Friday, he held a similar meeting with the operators of small companies. They informed the SECP Chairman that about half a dozen companies are offering insurance cover from terrorism for Rs100 million and more without any reinsurance arrangement.

The latest of such terrorist act witnessed was in Karachi on Thursday in which about a dozen automobiles were damaged. The SECP Chairman wants the insurance companies to obtain reinsurance arrangement from the international 'A' rated companies or obtain claim paying rating from the credit rating agencies of the countries.

The small companies complained that there was no even playing field as far as the insurance business is concerned. The government demands statutory deposit at the uniform rate of Rs5 million irrespective of the size of the insurance business a company was generating.

"The statutory deposit should be fixed in proportion with the insurance premium that a company generates," an executive said. Moreover, the size of the insurance premium denotes the amount of liability carried by any company is the other argument offered by small companies.

Small insurers complain that there is hardly any concept of risk management in big or small companies and insurer virtually remains vulnerable. The institution of insurance surveyors is pretty backward and lack technical and professional knowledge.

The government has failed to develop training courses in insurance, carry out development programmes in the business but has brought insurance business virtually under the administrative cover of the SECP.

The finance ministry is not ready to put in place a self regulated operational framework for the insurance companies, which too is causing problems in the business.