The Insurance Industry Reforms Committee (IIRC) has proposed 19 major amendments to the insurance laws to increase efficiency, transparency and cost reduction in the insurance industry. Sources told Business Recorder on Tuesday that the timeline for filing of statement of asset and liabilities under section 46(2) for the second and fourth quarters should be enhanced and made consistent with the Companies Ordinance, 1984.
Other proposed amendments revealed that the vehicles and office equipment made permissible and categorised as admissible assets for the purpose of solvency under section 32(2) as they carries value and can be readily sold. The committee said the deposits received against guarantees should be allowed as admissible assets as these are against normal credit and surety-ship business. The requirement of renewal of registration on annual basis under Rule 7 of SECP (Insurance) Rules 2002 should be waived as it is contradictory to sub section (1) of section 9 of the Ordinance.
The requirement to obtain declaration from insurance agents on an annual basis under section 98(1) of the Insurance Ordinance should be waived as it is practically difficult to obtain declaration from thousands of agents on annual basis. The requirement to complete foundation course by directors/partners under Rule 26(b) (1) of SECP Rule, 2002 should be waived as the companies/firms have their own internal arrangement and professional team to look after this, it said. The list of approved securities for the purpose of maintaining statutory deposits should be reviewed and Listed Securities, TFCs, Mutual Funds, etc, should be included to enable the companies to earn better return.
The Insurance Rules 2002 and SECP (Insurance) Rules, 2002 need to be merged and to have one set of rules. The restricted classes of business are not defined properly. Therefore it needs to be clarified along with its process and procedure to underwrite these classes if already allowed under the classes identified by the ordinance. The companies other than those having share capital should not be allowed to continue insurance business.
It proposed that all insurance companies must be incorporated under the Companies Ordinance, 1984 including all mutual, co-operatives and state-owned enterprises. Transitional provisions of the ordinance and rules that were required to be complied at the time of commencement of the ordinance should be removed.
Those provisions that were required to be complied over the initial periods of year from the commencement of the ordinance should also be removed if periods have expired like section 28, 35 & etc. Inter Fund receivables should also be treated as inadmissible asset, committee proposed. Indirect ownership interest should be defined in terms of section 104 of the ordinance and for any other case the word 'Indirectly' should be defined clearly.
The committee further proposed that all deferred assets should be classified as Inadmissible. The calculation of Premium Deficient Reserves for Takaful Companies also to be explained in detail for standardisation or computation within the industry. The companies who are meeting the requirement of minimum capital and solvency should not be required to increase the Statutory Deposit on issue of bonus share, the committee added.