May 6, 2020: The Securities and Exchange Commission of Pakistan has proposed amendments to the Credit & Suretyship (Conduct of Business) Rules, 2018 for the insurance sector, the objective of which is to delink the requirement of collateral under the Rules from the reinsurance.
Earlier, during stakeholder consultation session, it was pointed out that the Rules require procuring of collateral on guarantees/bonds of an amount equivalent to 80% of the sum insured less reinsurance, which has led to reduction of business and lessening of retention on credit and suretyship business.
Therefore, to facilitate industry, the SECP has proposed amendments in rules to delink the collateral requirement from reinsurance. It is proposed that the insurance companies may collect collateral at 10% of the sum insured under insurance guarantee contracts.
The SECP believes that this measure will facilitate the insurance industry increase in local retention of insurance risks thus reducing precious foreign exchange.
