PAKISTAN UNVEILS INSURANCE REFORMS
Pakistan commerce minister Humayun Akhtar has published a comprehensive reform strategy paper for the insurance sector. Under the proposals, Postal Life would be brought into the remit of the Insurance Law of 2000. The minister said that Pakistan had seen growth of 22% a year in premiums since 2002, reaching PRp52.2bn ($865m) last year, of which 57% was in non-life and the remainder in life. However, Mr Humayun noted that the level of insurance penetration remained low, at just 0.67% of gross domestic product. Penetration in the life sector, an area in which many Muslims feel uncomfortable buying policies, is only 0.27%, lower even than Bangladesh (0.42%) and only just over a tenth as high as penetration in India. Mr Humayan said that the major aims of government were to increase insurance penetration by relaxing the regulatory framework, encouraging the spread of insurance to rural areas, adjusting the regulatory framework for takaful and strengthening the sector’s capacity. Group workers’ compensation insurance is to be made compulsory, and a framework is being developed that would require all insurers to write a proportion of their business in rural areas. Two of the state-owned insurers, State Life and National Insurance Co, would immediately implement micro insurance schemes. Conventional insurers would be allowed to write takaful business through “window” operations, while new companies built up their distribution systems, the minister said. The capital base of state owned Pakistan Re would be increased, and its right of first refusal on 35% of reinsurance treaties of private sector companies would be reinstated. The three state-owned companies would continue to be federally owned, but would be run according to commercial principles, Mr Humayan said. Boards of directors would be allowed to take operational, financial and administrative decisions without the need to consult government departments. Finally, Mr Humayan noted a shortage of skilled insurance professionals in the country, and said that steps would be taken to increase the number of professionally qualified staff. The Pakistan Insurance Institute would be converted into the Pakistan College of Insurance & Takaful.
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