The Senate Standing Committee on Commerce and Textile Industry has approved the "Pakistan Marine Insurance Bill, 2017" with certain amendments to encourage and promote marine insurance sector, provide a legal framework for regulations and formulate rules for construction/ interpretation of marine insurance policies.
The committee met here with Syed Shibli Faraz in the chair on Thursday to regulate the business of marine insurance. The bill was referred to the committee by the Senate, while the National Assembly has passed the Bill during its session on May17, 2017.
The Bill will now be sent to the House and if passed, it will be referrred to the National Assembly. The chairman of the committee said that the Bill will be presented in the upcoming Senate session convened for October 23, 2017. According to committee chairman, a balance has been struck down after introduction of amendments to protect both insurance companies as well as the persons who avail the policy/insured.
As per the proposed legislation, the Securities and Exchange Commission of Pakistan (SECP) will regulate marine insurance business and extend it to the whole country.
The meeting was a continuation of Wednesday's meeting where the committee had directed for a consultative meeting between the ministry and stakeholders to agree upon the draft amendments. The amendments proposed are aimed at making this law adaptable to new developments and international best practices, as it is based on 1906 law.
The adopted amendments included changing the jurisdiction of the bill from Islamabad Capital Territory to the whole of Pakistan; excluding some redundant terminologies like the words rovers, streamer ships etc, making the scope of the bill more comprehensive defining the terms on the same pattern as in Insurance Ordinance 2000.
The secretary Commerce and Textile Industry told the meeting that previously the burden of proof was on insured but now it will be on insurer. Furthermore, two more clauses about knowledge of insurer reinforced the same things mentioned in the previous clause.
The amended draft also added a clause to effectively block overriding this law or the insurance ordinance in any agreement or contract of insurance. However, the law also provides for modification in case of mutual insurance where two parties can agree on special terms by consensus.
This has been agreed upon after consultations with the SECP and the PNSC which are the major stakeholders. The amended version also provides that power to make rules in this regard will rest with the federal government so they will be approved by the cabinet, power to issue directives and circulars will rest with minister-in-charge and power of regulations will rest with the SECP which is the regulatory body in this area.
The committee agreed that penalties for violation should be varying on the basis of premium amounts, losses incurred and the parties involved. It was also agreed that the law will be prospective in nature and all contracts, according to the previous law, will remain in place till their expiry. The committee chairperson observed that the law while protecting big contractors should also cover trollers and small fishing boats. The ministry responded that act covers the small corporative.
The committee was informed that the Insurance Ordinance 2000 (Section 4. (3)(a) classifies marine, aviation and transport business as non-life insurance business. However, Section 115 of the Insurance Ordinance 2000 titled 'Application of Pakistan law to policies in Pakistan' states that nothing in this section shall apply to a policy of marine insurance. Therefore, as such the matter of marine insurance is not covered by the 'Insurance Ordinance 2000.'
Presently, Pakistan does not have a law to deal with marine insurance. The marine insurance business in Pakistan is carried out on the basis of British Marine Insurance Act, 1906. This Act has long been held as the international industry standard and the marine insurance acts of many countries are based on this Act.
The committee was further informed that the disputes involving marine insurance have been decided by the courts in Pakistan by following the general provisions of British Marine Insurance Act and then interpreting these in the light of laws applicable in Pakistan. As substantial part of the marine insurance is reinsured in the international market; therefore, any interpretation different than the international practices considerably complicates business relations.
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