ISLAMABAD, Oct 19: The Securities and Exchange Commission of Pakistan (SECP) has directed insurance companies to make re-insurance arrangements to enhance maximum risk coverage.
An announcement to this effect issued by SECP here on Friday said that the step was aimed at building the capacity of the local insurance industry to honour the claims made to it in order to watch and protect the interest of the insured/policy holders in the country.
The SECP asked all insurance companies operating in Pakistan to make sound re-insurance arrangement, proofs of which was to be furnished to the Commission.
The Commission was conscious of the fact that without credible re-insurance arrangements, an insurance company’s first line of defence, re-insurance was incomplete on a risk coverage mechanism.
It is for this reason that the Insurance Ordinance 2001 that is being administered by the Commission, envisages that sound re-insurance arrangements are in place.
Under the Insurance Law, insurance companies are required to furnish necessary details in respect of the re-insurance arrangements made by them to the Commission annually.
“The Commission scrutinises in detail every bit of information furnished by insurance companies regarding their re-insurance arrangements,” said Khalid Mirza, Chairman, SECP.
It was important to assess each company’s exposure and retentions, per risk and per event, visa-a-vis their capital base and other net assets, he said.
In order to redress the grievances of the insured and to develop the insurance industry, the SECP would ensure that all the insurance companies made sufficient/sound re-insurance arrangements and obtained re-insurance treaties from the international reinsurers, at least rated “A” class, by the reputable international rating agencies, such as Standard and Poors, A.M. Best, etc.
If this is not done by the insurance companies, the SECP would not hesitate in taking strict action against the insurance company(s) concerned and in case of serious default their registration can be revoked, for which the commission was empowered under the Insurance Law, i.e. Insurance Ordinance, 2000.