SECP OUTSTANDING INSURANCE PREMIUM ISSUE

The Securities and Exchange Commission of Pakistan (SECP) has proposed
a draft amendments to the Rule 35 of the 2002 Securities and Exchange
Commission (Insurance) Rules by rectifying the issue of outstanding
insurance premium, faced by the insurance industry due to its
provisions, which relates to the payment of premiums by the
policyholders to insurers.


The proposed amendments have been published in the official gazette of
Pakistan to elicit public comments.

In order to strike a balance between the interests of policyholders
and insurers, the SECP has proposed to replace the provisions of the
existing Rule 35 with a new rule as a prudent method of market
practice, to be named as "Manner of Receipt of Premium and Claims
Payment".

Currently, the figures for the premium receivable by the insurers show
huge outstanding amounts with high potential of default, which is also
posing a large systemic threat, especially to the solvency of the
insurers and generally to the financial strength of the insurance
industry.

This phenomenon also seems abnormal when compared with the practices
in comparable jurisdictions. For example, in India, the total
outstanding premium of the industry is not more than 2%, as compared
to 21% in Pakistan, of the total premium.

Mohammed Asif Arif, the Commissioner of Insurance at the SECP, said
that with this move the insurance industry in Pakistan would become
stable in financial terms. He further added that this would also lead
to the overall protection of policyholders and further development of
local insurance industry.