Presenter: Amara Gondal October 07, 2011

1. PACRA’s Knowledge Session Regulator’s role in insurance industry of Pakistan Presenter: Amara Gondal October 07, 2011

2. SECP and insurance in Pakistan • The Securities and Exchange Commission of Pakistan has been regulating the Insurance industry, since January 2001 • It took over from the Controller of Insurance operating under Ministry of Commerce, Government of Pakistan. • The SECP regulates and monitors the Insurance Sector in the country through powers vested in the Insurance Ordinance, 2000 and the Companies Ordinance, 1984. • SECP basically monitors the compliance with the • Companies Ordinance-1984, • Insurance Ordinance-2000, • SEC Insurance Rules2002, • Federal Gov. Insurance Rules -2002, • Takaful Rules-2005, • Companies (Issue of Capital) Rules1996, • Companies Share Capital (Variation in Rights & Privileges) Rules-2000 • International Accounting and Financial Reporting Standards Insurance specific

3. Restructuring of SECP – insurance division • Chairman SECP Insurance division – Muhammad Ali • Restructuring of the division • MBA from IBA Khi • In 1994 finalized JV with WI Carr Securities, Asian Brokerage arm of Credit Agricole Indosueze, lead for Pakistan for 6 years • He made it the best and largest brokerage house in Pkistan • Ex-Director – Engro, KSE, etc. Insurance division • On- Site Inspections • Off-Site surveillance • Enforcement • Policy reforms • Registration • Reinsurance • Litigation • Advisory Policy, Regulation and Development Supervision Hiring of professionals chartered accountants, cost and management accountants, MBAs, lawyers and experienced insurance professionals

4. SECP’s contribution in insurance development • Since 2000, insurance witnessed growth of 21% Vs. 14% growth prior to the SECP • SECP has been the member of the International Association of insurance Supervisors (IAIS) since 2004. The SECP will soon be doing a self-assessment of the sector to ensure compliance with IAIS standards and best practices. • Insurance Ordinance, 2000 • Minimum paid-up capital requirements • Minimum solvency requirements with the commensuration of risk • Minimum statutory deposit requirements for the policyholders’ protection. • Tax anomalies affecting the insurance companies has been resolved • Establishment of the ombudsman office • Takaful rules, Bancassurance guidelines, life insurance illustration guidelines, IFRS-4 implementation

5. SECP’s role in developing insurance manpower • The SECP has an in-house H.R. and training department, engaged in organization-wide development of the employees of the SECP • arranging few training workshops in certain critical areas of business including corporate governance, anti-money laundering, etc. • A few options for insurance awareness programs are also being explored • The 'Fit and proper' criteria for the sound and prudent management of insurance companies. • Fit and proper person • Certain qualifications prescribed for insurance agents • New requirements – certifications • The Pakistan Insurance Institute • The Institute of Capital Markets

6. Developments in pipeline • new solvency rules • `Fit and Proper' criteria for Management of Insurance companies. • Development of Unit-linked/ Products Regulations. • Other recent initiatives taken by the SECP to increase the penetration include development of • micro insurance regulations • Terrorism Insurance Pool • New takaful rules. The Takaful Rules, 2005 are being reviewed and modified to remove anomalies and to address the areas which are silent in the existing Takaful Rules. A new set of Takaful Rules is being formulated and will be issued shortly. • FIF (1%) was to be spent on research activities, now the matter is being taken up

7. Insurance penetration | need to change the business model • Use of technology – web-based system • Instant policy issuance and renewal through their websites for all retail insurance products including car insurance, health insurance, travel insurance, etc. • Multiple payment options available including internet banking, credit card, debit card, etc. • These web-based systems to meet all pre and post-policy transactional needs of its customers. • One can compare plans, get quotes, buy, renew and keep a track of their insurance policies online. • use of multi-channel approach to sales, service and other allied activities • Bancassurance can be utilized for the distribution of insurance products through a bank’s network with tie-ups with various banks • a team of product managers, sales managers and sales executives to sell, cross-sell and up-sel1 its products

8. Regulatory environment in India • The Insurance Regulatory and Development Authority (IRDA) • Reopening of insurance had begun in early 1990, the Govt. Set up a committee in 1993 under the headship of former Governor of RBI to propose reforms in the insurance sector. • After submission of report in 1994, the foreign investors were allowed to invest in floating companies (JVs). • In 2000 IRDA was incorporated as an autonomous body to regulate and develop the insurance industry. • Key objectives: promotion of competition so as to enhance the customer satisfaction through increased consumer choice and lower premiums, while ensuring the financial security of the insurance market. • Since 2000, IRDA framed various regulations ranging from registration of companies to protection of policyholders’ interests.

9. Pakistan India 36 non-life insurers 7 life insurers 5 Takaful operators (2 life) Below 1% GDP penetration 64% market share with three companies (April10-Mar11) ~21% growth in last one decade (PKR 38bln or USD 434mln) 24 non-life insurers 23 life insurers – ~7% GDP penetration 45% market share with three companies (Jan10-Dec10) ~15-20% growth in last one decade (INR 426bln or USD 85bln)

10. THANK YOU