Insurance sector must have single regulator

The Debt Capital Market Committee of SECP has suggested to Ministry of Finance that to promote the insurance business in the country, a single and empowered regulator needs to be established.

The committee headed by chairman of SECP has finalized the draft of its recommendations and final report will be submitted to ministry of finance any time.

The committee was constituted some months ago.

According to draft of the report of the committee, obtained by The News, this is first time that SECP has loudly spoken against the discriminated attitude of ministry of commerce towards SECP with regard to implementation of the insurance laws of the country.

The Insurance Ordinance 2000 empowered SECP to regulate and control the insurance sector of the country but in 2002 besides SECP, ministry of commerce also promulgated almost the same Insurance Rules-2002 and obtained same powers as were vested to SECP and to date both organizations are fighting with each other to regulate the insurance industry of the country.

The draft of the report says, “there needs to be clarity regarding the regulation of the insurance industry. The exact sharing of responsibilities between ministry of commerce and SECP needs to be clarified and ideally a single and empowered regulator needs to be established. The growth of (insurance) industry is being affected due to regulatory uncertainty and lack of direction.” Under the federal rules of business, only federal cabinet or prime minister is empowered to demarcate the limits of the federal ministries and for the last six years the federal cabinet failed to resolve the issue of duplication of the powers to regulate the insurance industry in the country.

The committee has further recommended that regulatory framework for pensions need to be reviewed. The applicability of pension rules needs to be clarified.

Rules have been put out by SECP for provident funds but it is not clear whether these rules are applicable to pensions. According to committee the market is assuming that they are and acting accordingly but this grey area may impede development of insurance industry.

Presently acts promulgated in 1968 and 1976 govern pensions.

The committee observed, “This regulatory framework may be inadequate for current needs.”

The draft report said insurance regulation is not being undertaken in as rigorous and comprehensive manner as needed.

Most alarming issue is that there is insufficient focus on evaluating solvency of insurance companies.

Source: The News