SECP Approves Major Amendments to Strengthen Pakistan Insurance Sector

The Securities and Exchange Commission’s (SECP) Policy Board has approved major changes to the insurance regulatory framework, which includes amendments to the Insurance Rules, 2017, Insurance Accounting Regulations, 2017, and General Takaful Accounting Regulations, 2019.

This decision was made during a Policy Board meeting held at the SECP headquarters, chaired by Mehmood Mandviwalla, as reported by a news release.

These changes aim to reinforce the regulatory framework for the insurance sector by improving industry resilience, tackling major challenges within the sector, expanding capital sources, and simplifying reporting requirements.

A key change involves raising the minimum capital thresholds for both life and non-life insurance companies. Under the revised guidelines, non-life insurers will now be required to maintain a minimum paid-up capital of Rs. 2,000 million, while life insurers will need to meet a new requirement of Rs. 3,000 million, with the changes set to be gradually implemented by 2030.

The objective of these enhanced capital requirements is to improve the industry’s ability to manage risks, strengthen financial stability, and offer better protection to policyholders.

Another notable update introduces provisions for insurers to issue subordinated debt instruments and outlines how they should be treated for solvency purposes.

This reform provides insurers with greater financial flexibility, enabling them to tap into alternative capital-raising options, improve their creditworthiness, and maintain additional regulatory capital.

By enabling access to further capital, this amendment supports the long-term sustainability and stability of the insurance sector, in line with the SECP’s plan for a Risk-Based Solvency Regime.

Additional amendments focus on standardizing the recording of advance and withholding tax in the financial statements of life insurance companies. Also, the amendments address concerns regarding the need for life insurers to hold a specific portion of government securities for advance/withholding tax, which has now been relaxed.

Further changes to the General Takaful Accounting Regulations, 2019 allow non-life insurers with significant Takaful operations to present the full results of their Takaful activities alongside their conventional results.

Supporting notes will now offer detailed disclosures of both conventional and window Takaful operations, ensuring increased transparency in financial reporting. This modification aims to provide a clearer view of an insurer's financial health and enhance stakeholder confidence in the sector.