In order to consult the stakeholders, the Securities and Exchange Commission of Pakistan (SECP) has issued Draft Credit and Suretyship (Conduct of Business) Rules, 2016 vide SRO 511(I)/2016. The draft rules are aimed at formulating a comprehensive framework to regulate the guarantee business, thereby ensuring maximum protection of the interests of the insurance policyholders and at gaining confidence of the public.
The purpose is to increase insurance penetration in Pakistan. The framework has been devised in such a manner so as to limit the risk exposures taken on by the insurers with respect to guarantees issued by them. After promulgation of these Rules insurers shall be required to procure specified forms of collaterals and also maintain special reserve (called the contingency reserve) well in advance so that they do not find it cumbersome to honour the guarantees as and when any of these guarantees are called.
Moreover, the draft rules also require the insurers to formulate specific pricing and underwriting policies, which shall be required to be filed with the Commission. Not only this, the insurers shall also be required to report to the Commission on an annual basis about the status of each insurance guarantee issued by them.
It is believed that with the promulgation of the final Credit and Suretyship (Conduct of Business) Rules, the confidence of the policyholders as well as the public at large will increase, contributing to better insurance penetration levels in the country.-PR
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