The Securities and Exchange Commission of Pakistan (SECP) has directed life insurance industry to ensure that all life insurers have entered into the Centralised Information Sharing Solution for Life Insurance Industry (CISSII) Participation Agreement before May 1, 2014 and implement a formal information sharing mechanism among the life insurer to reduce systematic risk.
In this regard, the SECP has issued circular number 7 of 2014 and SRO.162(I)/2014 here on Thursday. As per SECP directive, all life insurers are required to enter into CISSII Participation Agreement before the effective date of May 1, 2014 and share the information in accordance with the CISSII Participation Agreement from the effective date.
According to the SECP, the commission has issued directive to all registered life insurers under the Insurance Ordinance, 2000. The primary objective of the CISSII is to enhance the policyholders' protection and sound development of the life insurance industry through promotion of a formal Information sharing mechanism among the life insurer to reduce systematic risk in life insurance industry. All life insurers (including family Takaful operators) are required to share information in respect of their individual life and group life business through any distribution channel with the Central depository company in accordance with the CISSII Participation Agreement. However, any life insurer carrying out only health insurance business is not required to participate in CISSII.
All life insurers (including family Takaful operators) are required to share information in respect of their individual life and group life business through any distribution channel with the Central Depository Company in accordance with the CISSII Participation Agreement. However, any life insurer carrying out only health insurance business is not required to participate in CISSII, SECP said.
Earlier, the Securities and Exchange Commission of Pakistan (SECP) has constituted the Insurance Industry Reforms Committee (IIRC) on May 10, 2012 to develop a comprehensive roadmap to promote a financially sound and technologically efficient insurance industry in Pakistan. The SECP has made public the IIRC Report 2014 on February 27, 2014. The Committee had been divided into 5 sub-committees addressing different functional areas. It was pointed out at the Operational Challenges Sub-Committee forum that there is lack of coordination between insurance companies regarding sharing of some critical information like acceptance of claim, postponed or declined life risks, malpractices by agents etc due to absence of a formal information sharing mechanism. The Committee highlighted that such a mechanism can be arranged either at SECP level or at an independent body which possess capacity and technological infrastructure to manage large data warehouse and support the efficient dissemination of that data. One of such organisations highlighted was the Central Depository Company (CDC) which has proven expertise in this area.
The members of the sub-committee visited the CDC house on October 11, 2012 and asked the CDC to present a business case. All the participants of the meeting mutually agreed that the solution proposed by CDC is beneficial for the life insurance industry and these companies would be part of any such initiative, Participants of the meeting also concluded that a modular approach should be adopted in areas where immediate development can start (like claim register, agency & s-reference register, underwriting information etc). Subsequently, a Memorandum of Understanding (MoU) was signed between all life insurers (including family Takaful operators) and the CDC on March 21, 2013 where it was agreed between the parties that a Centralised Information Sharing Solution for Life Insurance Industry (CISSII) should be developed as it will be an important mechanism for the life insurance industry which will result in greater efficiencies and transparency in the industry.
The SECP has been providing regulatory support to this arrangement for the betterment of the industry. Through the attached directive, all life insurers are required to enter into the CISSII Participation Agreement before May 1, 2014 and share the information in respect of their individual life and group life business from the date, SECP added.
Through SRO162, the SECP said that the directive shall apply to the functioning of the Centralised Information Sharing Solution for Life Insurance Industry (CISSU) to be developed and maintained by the Central Depository Company in accordance with Memorandum of Understanding (MoU) singed between Central depository company and life insurance/ family Takaful operators on 21st March 2013 for effective development of life insurance industry. The detailed rights and obligations of the life insurers and the Central depository company with regard to confidentially and security of information shall be provided in the CISSU Participation Agreement.
The primary objective of the CISSII is to enhance the policyholders' protection and sound development of the life insurance industry through promotion of a formal Information sharing mechanism among the life insurer to reduce systematic risk in life insurance industry.
All life insurers (including family Takaful operators) are required to share information in respect of their individual life and group life business through any distribution channel with the Central depository company in accordance with the CISSII Participation Agreement. However, any life insurer carrying out only health insurance business is not required to participate in CISSII.
Any life insurer registered after the notification of the directive shall participate in CISSII as per the terms of the CISSII Participation Agreement. The CISSII agreement shall at the minimum provide for various types of centralised agent's register including s-register, centralised register for postponed and declined life risks, centralised claim register and centralised group life claim experience register.
Where any difficulty arises in giving effect to any of the provisions of this Directive in a particular cases, or class of cases, or if it would be in the Interest of insurance sector so to do, the Commission may, for reason to be recorded in writing relax such requirements subject to such conditions as it may deem fit. The directive shall be effective from May 1, 2014. All life insurers are required to enter into CISSII participation agreement before the effective date and share the information in accordance with the CISSII Participation Agreement from the effective date, it added.