ISLAMABAD, Jan 16: The Securities and Exchange Commission of Pakistan (SECP) has decided to revoke on February 1, 2002 the registration certificates of insurance companies, who failed to prove adequate reinsurance cover, official sources said.

This is in line with the decision to strengthen the insurance sector on sound financial and management grounds as provided under section 12 of the insurance ordinance 2000.

Of the total 48 companies, only 23 responded positively and presented the evidence of meeting this requirement while 25 of them failed to submit their response. How many of them really met the required criteria is yet to be seen as the documentary details were currently under the evaluation process.

SECP said here on Wednesday that it issued directives to 25 insurance companies to provide evidence by January 31, 2002 of sound and adequate reinsurance cover and compliance with the criteria for prudent management in the company failing which their registration might be revoked. The notices have been issued here on Wednesday.

The criteria under section 12 of the insurance ordinance 2002 require that the business of the insurer is carried on with integrity, due to care and the professional skills appropriate to the nature and scale of its activities.

Each director and officer on the principal officer in Pakistan, of the insurers, should be fit and proper person to hold that position. The insurer must be directed and managed by a sufficient number of persons who are fit and proper persons to hold the position.

The insurer must maintain adequate accounting, systems of control and other records of its business.

The SECP had notified all the 48 companies operating in the country in October last to fulfil these requirements as part of regulatory measure to ensure protection of interests of policy holders.

The October 18 notification said: “You are advised to furnish evidence pertaining to your reinsurance arrangements for the year 2002. For this purpose you shall furnish certified copies of all correspondence pertaining to treaties or the documentary evidence on or before January 15, 2002, which establishes that your company has made adequate reinsurance arrangements in respect of the risks to be accepted by the company whether in or outside Pakistan.”