LAHORE, Jan 8: The last-minute refusal by the Pakistan Reinsurance Company Ltd (PRCL) to endorse reinsurance treaties of several local insurance companies has left them high and dry as they strive for completing their reinsurance arrangements for the year 2002 before January 15, the deadline given by the SECP.

The failure of any insurance company to complete its reinsurance arrangements to adequately cover the risks and furnish the SECP with documentary evidence before the expiry of the deadline would entail cancellation of its licence.

The industry sources told Dawn here on Tuesday that it was mandatory for all the insurance companies operating in the country to give 15 per cent (compulsory session) of their 100 per cent reinsurance business to the PRCL (formerly the Pakistan Insurance Company). The PRCL, the only reinsurance company in Pakistan, also has the “first right of refusal” to endorse or underwrite 35 per cent (surplus treaties) of their remaining 85 per cent reinsurance business.

“It is the moral duty of the PRCL to advise the companies if it is accepting their surplus reinsurance treaties or not well before the end of December every year. But this time several companies have been informed of the PRCL refusal to endorse their surplus treaties as late as Jan 4 that leaves them with very short time to complete their reinsurance arrangements in time,” a senior executive of a company said.

Meanwhile, the executive said, the SECP directive to the companies to get their reinsurance treaties endorsed only by a Class “A” local or foreign underwriter has complicated the situation for some firms for want of time.

The SECP had issued the directive after consultation with the insurance sector last year.

Furthermore, the industry sources say, some consultants working on behalf of unknown foreign underwriters of reinsurance have also jumped into the field. They are said to have written letters to the local insurance companies offering their services to arrange and place their reinsurance treaties with Class “A” foreign underwriters for money.

According to the source, some insurance companies have received a letter from a Karachi-based consultant, who claims to be working for a Costa Rica based underwriter of insurance and reinsurance. The source said the “consultant had demanded a sum of Rs50,000 on non-refundable basis for helping a company place its reinsurance treaties with the PCI.”

The sources have serious reservations about such “consultants” and consider them as “fake”. “It is strange that the letter we’ve got from this consultant plainly points out that the PCI shall endorse only those treaties which will not entail cash calls. What is the use of getting endorsement from such a company?,” the source said, urging the SECP to take action against such “fake brokers” who were trying to fleece the insurers.