Modernizing Pakistan’s Insurance Sector: A Must for Economic Growth

Federal Minister for Commerce Jam Kamal Khan has emphasized the critical need to modernize Pakistan’s insurance sector to align with the shifting economic landscape. He stated that broadened insurance coverage and an updated regulatory structure are vital for the nation’s progress.

Khan’s remarks came during a briefing organized collaboratively by the Ministry of Commerce’s Insurance Wing and the Securities and Exchange Commission of Pakistan (SECP). The briefing featured a presentation on the proposed revisions to the Insurance Ordinance, 2000.

These reforms, formulated after extensive stakeholder consultations, are slated for submission to the Federal Cabinet for preliminary endorsement.

Highlighting the low insurance penetration in Pakistan compared to other economies in the region, Jam Kamal Khan advocated for increased awareness, innovation, and regulatory updates to extend its reach. He commented, “Insurance is more than just a financial tool; it serves as a crucial safety net for both individuals and businesses. Pakistan must expand its coverage to foster comprehensive economic development.”

The proposed Insurance Ordinance (Amendment) Bill presents comprehensive changes across four key areas:

  • Opening the insurance market to enhance competition, facilitating the entry of foreign insurers and reinsurers, acknowledging microinsurers and digital-only insurers, and enabling private sector involvement in public sector risks.
  • Encouraging ease of business operations, technology adoption, and the creation of innovative products like index-based insurance and coverage for disaster risks.
  • Streamlining the primary law by transferring operational specifics to regulations, thus making the framework more adaptable and principle-driven.
  • Reinforcing supervisory oversight via a risk-based capital structure, solvency mandates, improved governance, and expanded SECP enforcement capabilities.

The modifications also seek to harmonize the law with related financial legislation, including the Companies Act 2017 and the Federal Ombudsmen Institutional Reforms Act 2013, while enabling Pakistan’s insurance sector to adhere to global standards.

The minister observed that a more robust insurance market would not only safeguard citizens and enterprises but also stimulate long-term savings and investments, essential for lasting economic advancement. He reiterated the government’s dedication to fostering an environment where the insurance sector can innovate, broaden its scope, and significantly contribute to Pakistan’s economy.