July 18, 2022: To promote the implementation of sound principles of risk management in credit and suretyship businesses of insurance companies, the Securities and Exchange Commission of Pakistan (SECP) has notified amendments to the Credit and Suretyship (Conduct of Business) Rules, 2018, said a press release issued today.
The amendments require insurance companies to develop a risk assessment mechanism to evaluate the technical and financial strength of the persons on whose behalf the bond/guarantee is being issued. This is intended to assess the principal obligors' experience and expertise to carry on the project work, as well as their financial strength.
Furthermore, in order to optimally utilize the local absorption capacity available within the country, and to curtail the outflow of reinsurance cessions abroad, the collateral requirements have been delinked from the reinsurance arrangement. Through these amendments, SECP has also reduced the cash collateral requirement to 10% of the bond value.
The S.R.O 1010(I)/2022 covering the amendments to the Rules has also been placed on SECP's website, available at https://www.secp.gov.pk
