The regulations were prepared after thorough consultation with stakeholders and insurance industry experts; and are in line with the best international practices prescribed by the International Association of Insurance Supervisors (IAIS). The regulations are meant to safeguard the interests of present and future policyholders, shareholders and insurance claimants.
The ‘fit and proper’ criteria is prescribed and implemented by regulators globally in the financial sector. It is considered necessary to promote good corporate governance, which helps to protect the interest of all stakeholders and is vital to prepare the insurance industry to meet the challenges of globalisation and avoid maladministration, for which the insurance companies must be run by competent persons with adequate know-how.
The 2000 Insurance Ordinance requires every insurer, inter alia reinsurer, to ensure meeting the criteria for sound and prudent management, as laid down under Section 12(1) of the ordinance read with the regulations.
It has been found that the appointment of the present chairman of the Pakistan Reinsurance Company Limited (PRCL) is in contravention of Section 12(1) of the ordinance read with the regulations, and is done without seeking the required prior approval of SECP.
The PRCL is a public sector company under the administrative control of Ministry of Commerce. The company is headed by a chairman with a board of directors, most of the members of which are nominated by the federal government. The SECP has already informed the Ministry of Commerce of this breach of the law.
It is pertinent to mention that the regulations are applicable to the entire insurance industry, which falls under the regulatory domain of the SECP under the 2000 Insurance Ordinance without any discrimination between the public and private sector.