Insurance Sector Pakistan

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Insurance Sector Pakistan Powered By Docstoc


 MARCH 03,2009
A form of risk management primarily used to hedge against
                the risk of a contingent loss.

Insurance is that business where parties enter and carry out
     policies and contracts in consideration of a premium

When any or all of the pre-decided events specified in the
  contract occur, one party that has committed to make
 payments to the other is legally responsible to fulfill its
                 commitment respectively.

                         Non – Life
Takaful   INSURANCE      Insurance

   Public sector insurance company:
        State Life Insurance Company
        National Insurance Company Limited

   Listed private sector insurance companies:
    1        Adamjee Insurance Ltd       11   New Jubilee Ins. Co.Ltd
    2        Asia Insurance Co Ltd       12   Gen. Ins. Co.Ltd
    3        Askari Gen. Ins. Co.Ltd     13   PICIC Insurance Ltd
    4        Atlas Insurance Ltd         14   Premier Insurance Ltd
    5        Central Insurance Co Ltd    15   Reliance Insurance Co Ltd
    6        Century Insurance Co Ltd    16   Shaheen Ins.Ltd
    7        Crescent Star Ins. Co.Ltd   17   Silver Star. Ins. Co.Ltd
    8        East West Ins. Co.Ltd       18   United Ins. Co of Pak Ltd
    9        EFU Gen Ins.Ltd             19   Universal Ins. Co.Ltd
    10       Habib Insurance Co Ltd      20   IGI Insurance Ltd
   Non Listed private sector insurance companies:

    1     ACE Insurance Ltd                    7    New Hampshire Insurance Co Ltd

    2     Agro Gen Ins Co Ltd                  8    Security General Ins Co Ltd

    3     Alpha Insurance Co Ltd               9    Saudi Pak Insurance Co Ltd

    4     Capital Insurance Co Ltd             10   Trakker Direct Ins Ltd

    5     Cooperative Ins Society of Pak Ltd   11   UBL Insurance Ltd

    6     Excel Insurance Co Ltd
 Market Share of Non- Life Insurance Companies(
 gross premium)

                                   Adamjee Insurance
   18%                             EFU Gen. Ins. Ltd.
                     30%           New Jubilee Ins.
 2%                                IGI
2%                                 New Hampshire Ins.
3%                                 Askari Gen.
 3%                                Atlas Insurance
                                   Habib Insurance **
  10%                              Shaheen Insurance
(2001 – 2008)
   Factors for turn around and remarkable growth:
     Higher per capita income
     Reforms in the sector
     Expansion in trade sector
     Growing private sector credit

   Double digit growth witnessed in both life and non
    life insurance sectors

   Life insurance dominated the insurance sector
   Factors for slow growth of sector:
     Frequently occurring natural disasters
     Deteriorating law and order situation
     Inflation

   Overall net premium revenue and net claims went

   Overall claim ratio went up to 76 % from 70 % in
    the previous year
   Negative impact on the sector because of:
     The tragic assassination of Mohtarma Benazir Bhutto
     The incidents of rioting and damages to motor
      vehicles, property, etc.

   Net premium revenue and net claims increased

   Overall claim ratio also increased to 83% from 76%
    in the previous year

   Total underwriting loss also increased
   Stock markets underwent major decline resulting in:
     Low investment income
     Less pre-tax profit for the period

   Examples:
       IGI:
            EPS (9 month period ended Sept 30, 2008) = Rs. 1.72
            {against Rs. 6.62 for the corresponding period of 2007}

       EFU:
           After tax profit (9 months ended Sept 30,2008) = Rs. 345 million
            {compared to Rs. 1,010 million in the corresponding period of 2007}
   Major Players:
     State Life Insurance of Pakistan (75%)
     EFU (13.48%)
     NJI (7.43%)

   Grown into an avenue for long term saving products

   Between 2001 and 2005, the life insurance sector grew

   Factors responsible for this growth:
     positive economic activity
     low interest rate
     stronger regulatory framework
   Growth in gross premium

       During the time period 2001-
        2005, the life insurance sector
        gross premium recorded a
        CAGR of around 22.2%

       This growth spanned across
        both individual as well as
        group insurance businesses
   Decline in Public owned State
    Life Insurance Company

       Share of the public owned state
        life insurance company fell
        from 87% in 2001 to 84% in 2002
        and as low as 75% in 2005

       The market share of private
        insurance companies increased

       They marketed new innovative
        insurance based products in an
        aggressive manner to be able
        to meet the increased paid up
        capital requirement enforced
        by SECP
   Overall improvement in the financial performance of the
    Life Insurance Companies

       Improved between the years 2001 and 2005

       Liquidity ratios, Capital adequacy and operating efficiency

       Asset quality indicators such as ROA declined
   Dominated by a large number of privately owned

   Between 2001 and 2005, the non-life insurance
    sector also recorded remarkable growth

   Factors responsible for this growth:
       high economic growth
       high level of industrial and trade activities
   Major contributors to growth:

       Fire
       Motor
       Marine categories

   Capital adequacy, liquidity,
    Return on Assets and
    profitability improved
   Takaful, an Islamic insurance concept that observes
    the rules and regulations of the Islamic Law.

   Three players currently operating in the Takaful
       Pak Kuwait Takaful
       Takaful Pakistan
       Pak Qatar General Takaful

   Takaful has immense potential for growth
   Reinsurance is a means by which an insurance
    company can protect itself against the risk of
    losses with other insurance companies.

   Monopoly in the Reinsurance sector of Pakistan

   Pakistan Reinsurance Company Limited (PRCL) –the
    only Reinsurance Company operating in Pakistan
Non Life Private Sector   Non Life Public Sector

  Life Private Sector      Life Private Sector
   Its purpose is to:

       Regulate the business of the insurance industry

       Ensure that the interests of the insurance policy
        holders are well protected

       Promote the sound development of the insurance
   Financial Standards

       Capital requirements raised:
         Life Insurance: from PKR 100 million to PKR 150 million

         Non life insurance: from PKR 40 million to PKR 80 million

       Minimum solvency margin has been enhanced to PKR 50
        million from PKR. 5 lac or 10% of the net premium income

       Statutory deposits have been raised from PKR 350,000/- to
        PKR 5 million
   Intermediaries

     Insurance companies now register their own agents
     New institution of insurance brokers introduced in Pakistan

   Market Conduct

       The purpose is to:
         Improve market conditions

         Develop capital market

         Prevent insurers from indulging in practices harmful to the

          interest of policyholders
   Insurance Ombudsman

     To investigate maladministration of insurance companies
     To restore grievances of the insurers

   Small Disputes Resolutions Committee

       To settle minor claims quickly

   Investigations

       Commissions given powers of investigation and issuance of
   Paid up capital requirement increased

   Solvency and investment committee formed by the
    SECP to review the solvency requirements

   Minimum equity requirement doubled for foreign
    insurance companies

       Foreign companies shall bring in a minimum of $2 million
        in foreign exchange and raise an equivalent amount of
        equity from the local market.
   Convert Pakistan Insurance Institute into Pakistan
    College of Insurance and Takaful at Karachi

   Funds for the development of insurance sector:
     Insurance education
     Insurance awareness
     Fire fighting facilities

   A website is introduced that provides information
    about almost all the aspects of insurance industry
   Insurance - an involuntary expense in Pakistan due to
    the general lack of awareness of insurance products

   Promotion of consumer awareness and education

   Insurance companies must look for other avenues and
    provide innovative products

   Low share of Pakistan in the global insurance industry
   Reduction in the concentration ratio due to rapid growth
    and reforms

   There exists a considerable scope for further consolidation
    of small-sized weak institutions

   HR development
       Quality and caliber of personnel
       Some programs started in Karachi and Punjab Universities

   Suitable legal framework and regulatory environment
   Strong industry body is a must for driving change

   IAP should organize forums

   Strengthen the consumer protection infrastructure

   Appointment of the Insurance Ombudsman

   Inherent fluctuations in trading business- investing in the
    stock market is risky

   Insurance database
   Positive future especially for the non-life insurance
    market in Pakistan

   Growth in non-life insurance will depend entirely on
    growth in GDP

   Future lies in the hands of better informed legislators,
    more responsible insurance professionals and customers