The Securities and Exchange Commission of Pakistan (SECP) has observed that the solvency requirements are essential for the supervision of insurance companies as well as protection of the policyholders. In this regard, the SECP has sent the draft rules to the Printing Corporation of Pakistan for publication in the official gazette.
Sources told Business Recorder here on Thursday that an insurer's technical provisions should be sufficient 'at all times' to cover expected claims and unexpected losses, according to valuation requirements. In order to protect the policyholders from undue losses, it is necessary to establish not only a minimum capital level, but also a solvency control level, or series of control levels, which act as indicators or triggers for early supervision action, before problems become serious threats to the insurer's solvency.
Keeping in view the recent global market events and the resultant uncertainty, the commission felt the urgency to review the existing solvency requirements as prescribed in the Insurance Ordinance 2000 and SECP Insurance Rules 2002, sources stated. A committee of experts comprising representatives from the Insurance Association of Pakistan.
The SECP and Pakistan Society of Actuaries, was formed to give its recommendations on framing guidelines on investment of funds, valuation basis for assets and liabilities, allocation of investments, criteria for admissibility of assets and solvency along with reporting on solvency by insurers as part of the regulatory accounting returns. Sources added the committee's recommendations have now been approved by the commission and these rules would be published in the official gazette for eliciting public opinion.
The commission wanted to revise solvency requirements and frame guidelines on investment of insurance companies through changes in the Securities and Exchange Commission (Insurance) Rules 2002. The relevant committee has submitted recommendations on framing guidelines on investment of funds; valuation basis for assets and liabilities; allocation of investments and criteria for admissibility of assets and solvency along with reporting on solvency by insurers, as part of the regulatory accounting returns.