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PART II
Statutory Notifications (S.R.O.
938)
GOVERNMENT OF PAKISTAN
SECURITIES AND EXCHANGE
COMMISSION OF PAKISTAN
NOTIFICATION
Islamabad, the 12th
December, 2002
S.R.O. (I)/2002.- In exercise of the powers conferred by
sub-section (2) of section 167 of the Insurance Ordinance,
2000 (XXXIX of 2000), the Securities and Exchange Commission
of Pakistan, with the approval of the Board, is pleased to
make the following rules, the same having been previously
published as required by sub-section (2) of the said
section, namely: -
1. Short title and
commencement. - (1) These Rules may be
called the Securities and Exchange Commission (Insurance)
Rules, 2002.
(2) They shall come into force at once.
2. Definitions.- (1) In
these rules, unless there is anything repugnant in the
subject or context,-
(a) “Bank” means the State bank of Pakistan; and
(b) “Ordinance” means the Insurance Ordinance, 2000
(XXXIX of 2000).
(2)
The words and expressions used but not defined shall have
the meaning assigned to them in the Ordinance.
3.
Qualifications of actuaries.-(1) Subject to sub-rule
(2), any person signing as actuary under the Ordinance shall
be a Fellow of -
(a) the Pakistan Society of Actuaries; or
(b) the Institute of Actuaries in England; or
(c) the Society of Actuaries in the United States of
America; or
(d) such other body as may be recognized by the
Commission for the purposes of this rule, after obtaining
views of the Pakistan Society of Actuaries.
(2) The person referred to in sub-rule
(1) shall have at least thirty-six months’ post Fellowship
experience out of which at least twelve months shall have
been in Pakistan within the thirty-six months preceding the
date of signing.
4. Additional sub-classes of insurance business.-
For the purposes of sub-section (5) of
section 4 of the Ordinance, insurance business of the nature
of a domestic insurance policy or of a private motor
property damage policy as defined in section 2 of the
Ordinance shall not be considered related and subsidiary to
life insurance business.
5. Application for
registration as an insurer.-(1) For the purposes of
sub-section (6) of section 6 of the Ordinance, an
application for registration as an insurer shall contain the
following information, namely:-
(a) The name of the insurer;
(b) the address of the principal office and in the case
of an insurer incorporated outside Pakistan, the address
of the principal office outside Pakistan;
(c) the name, address and occupation of the directors
of the insurer, and particulars of other directorships
held by them;
(d) the nature of, and all considerations and other
benefits passing under, any agreement between the
applicant and any director;
(e) the names and addresses of, and particulars of any
business carried on by, each person holding an interest of
ten per cent or more in the issued share capital of the
insurer;
(f) a statement of the class or classes of insurance
business to be carried on by the insurer;
(g) where registration is sought for life insurance, a
statement of the statutory funds to be established by the
insurer;
(h) the name and address of the auditor of the insurer,
and a statement by the auditor that he consents to act as
auditor of the insurer;
(i) where registration is sought for life insurance,
the name and address of the appointed actuary of the
insurer, and a statement by the appointed actuary that he
consents to act as appointed actuary of the insurer;
(j) the name and address of the bank or banks which the
insurer uses or proposes to use as its principal banker or
bankers;
(k) the name and address of any investment custodian
used or proposed to be used by the insurer;
(l) a statement of the authorized share capital and the
paid-up share capital of the insurer, certified by the
auditor of the insurer;
(m) a statement, dated not more than seven days
previous to the date of the application, from the Bank
showing the amount deposited pursuant to section 29 of the
Ordinance;
(n) a statement of the existing, if any, and proposed
reinsurance arrangements of the insurer;
(o) particulars of any agreement other than a
reinsurance agreement which the applicant has with any
person or body corporate carrying on insurance business;
(p) particulars of the measures proposed by the
applicant to ensure compliance with the requirements laid
down in section 11 of the Ordinance including particulars
of the senior management structure of the applicant, and
the qualifications and experience of senior managers and
directors; and
q) particulars of the investment policy of the
insurer.
(2) For the purposes of section 8
of the Ordinance, an application shall be a document, which
may be inspected or copied, to the extent only of the
information described in clauses (a) to (m), both inclusive,
of sub-rule (1).
6. Documents to be submitted along with application
for registration.- (1) For the purposes of
sub-section (6) of section 6 of the Ordinance, the following
documents shall be submitted along with any application for
registration, namely:-
(a) A copy of the Statute, charter, deed of settlement,
memorandum of association or other document by which the
applicant is constituted;
(b) a copy of the articles of association or rules in
respect of the applicant;
(c) if applicable, a photocopy of the certificate of
incorporation and the certificate of commencement of
business of the applicant;
(d) in respect of an applicant who was not carrying on
insurance business on the 19th August, 2000, a statement of
assets and liabilities of the applicant, made up to a date
not more than three months previous to the date of the
application, in the form as set out in Annexure I for life
insurers or non-life insurers, as the case may be, in
conformity with the provisions of sub-section (1) of section
46 of the Ordinance;
(e) copies of all accounts, statements and reports laid
before the shareholders of the applicant at the last five
annual general meetings of the shareholders or, if less than
five annual general meetings of the shareholders of the
applicant have been held, copies of the accounts, statements
and reports laid before the annual general meetings of
shareholders which have been held;
(f) in respect of life insurance and
in respect of such classes of non-life insurance as are
prescribed pursuant to sub-section (6) of section 4 of the
Ordinance, a certified copy of the published prospectus, if
any, and of the standard policy forms of the insurer and
statements of the assured rates, advantages, terms and
conditions to be offered in connection with insurance
policies together with a certificate in connection with life
insurance business by the appointed actuary that such rates,
advantages, terms and conditions are workable and sound; and
(g) a business plan showing projected business to be
written and cash flows for a period of not less than ten
years from the date of the application in the case of a life
insurer and not less than three years from the date of the
application in the case of a non-life insurer, showing the
forecast financial position of the insurer as at the 31st
December, in each calendar year, and the forecast results of
the insurer for each year or part of a year ending on the
31st December.
(2) Any document required to be submitted which is
not in either the English or Urdu language shall be
accompanied by a certified translation of that document into
the English or Urdu language.
(3) For the purposes of section 8 of the Ordinance,
the documents specified in clauses (a), (b), (c), (d), (e)
and (f) of sub-rule (1) shall be the documents which may be
inspected and copied.
7. Renewal of registration.-
(1) For the
purposes of sections 11 and 12 of the Ordinance, every
insurer registered under the Ordinance shall apply for
renewal of registration on annual basis.
(2)
Every application made under sub-rule (1) shall be
accompanied by a declaration by the applicant that the
conditions imposed on registered insurers as specified in
sections 11 and 12 of the Ordinance have been complied with.
8. Transitional provisions.-
(1) The provisions
of this rule shall apply to conversion from a life insurance
fund to a statutory fund or funds under section 25 of the
Ordinance.
(2)
Upon conversion, an insurer shall allocate all policies,
which are in force, including policies, which have been
made paid-up under the provisions of the repealed Act, to
one or more statutory funds in accordance with such
criteria as may be determined by the appointed actuary.
(3)
Upon conversion, an insurer shall create so many as are
required of the ledger accounts specified in sub-sections
(1) and (2) of section 22 of the Ordinance.
(4) As at the date of conversion the opening balance
in A, B, C and D accounts shall be determined by the
appointed actuary on a fair and equitable basis having
regard to the provisions of the Ordinance.
(5) The amount initially recorded as capital
contributed by shareholders shall be the cumulative amount
as at the date of conversion of capital, if any, contributed
by shareholders in respect of the business carried on in the
statutory fund created by conversion, after the deduction of
any such capital as at that date which has been allocated
for the benefit of participating policy holders.
(6) The amount initially recorded as reserves shall
be the amount as at the date of conversion of any reserves
required to be maintained under the Ordinance.
(7)
Immediately following the recording of the amounts referred
to in sub-rules (4), (5) and (6), the insurer may effect a
transfer from the B account to the credit of the C account
of not more than such amount which would result in the B
account having a credit balance of one-ninth of the A
account:
Provided that in the case of the State Life Insurance
Corporation the words “one-ninth” in this sub-rule shall be
read as "one-thirty-ninth".
9. Minimum statutory deposit levels.- (1)
Subject to sub-rules (2) and (3), for the purposes of clause
(b) of sub-section (2) of section 29 of the Ordinance, the
prescribed amount shall be five million rupees.
(2) For an insurance company which has, for two years
immediately preceding the end of any calendar year,
maintained not less than the minimum level of paid up
capital applicable to that company under section 28 of the
Ordinance and not less than the minimum level of solvency
applicable to that company under section 35 or 36 of the
Ordinance, in both cases without applying the proviso to
section 28 of the Ordinance, the prescribed amount in
respect of that company under sub-rule (1) shall be zero.
(3) Subject to sub-rule (2), with immediate effect
the amount of statutory deposit shall be one million rupees
and from then for the period until the 31st
December, 2002, two and half million rupees, until the 31st
December, 2003, three and half million rupees and until the
31st December, 2004, and thereafter five
million rupees.
10. Admissibility of assets.-
(1) For the
purposes of sub-section (2) of section 32 of the Ordinance,
the prescribed percentages for an insurance company which
was registered as at the commencement date of the Ordinance,
the amount prescribed in the repealed Act shall be
applicable until the 31st December, 2002, and thereafter for
such companies, and for a company registered after the
commencement date, the percentages specified in column (3)
of the table below shall apply for the clauses of the said
sub-section specified in column (1) of that table in respect
of the assets described in column (2) thereof.
|
Clause. |
Description of Assets |
Percentage |
|
(1) |
(2) |
(3) |
|
(b) |
In
a statutory fund of a life insurer, any assets |
Five per cent for life insurer. |
|
(f)
|
Loans which are secured against
immovable property: |
|
|
(i)
approved securities and approved investments;
and |
Fifty per cent for both life and non-life
insurer. |
|
(ii) other loans secured against immoveable
properties. |
Five per cent for both life and non-life insurer. |
|
(n) |
Any
one unit of immovable property. |
Fifty per cent in the case of non-life insurer and
five percent in case of life insurer. |
|
(o) |
Total immovable property. |
Sixty per cent in the case of non-life insurer and
twenty per cent in case of life insurer. |
|
(p) |
Shares in any one company or in group of related
companies |
Twenty-five per cent in the case of non-life insurer
and five per cent in case of life insurer. |
|
(q) |
Shares of the listed companies in the aggregate. |
Seventy per cent in the case of non-life insurer and
fifty per cent in case of life insurer. |
|
(r) |
Shares of companies (not being listed companies) in
the aggregate. |
Ten
per cent in the case of non-life insurer and two and
half per cent in case of life insurer. |
|
(s) |
Immovable property and shares in the aggregate. |
Eighty per cent in the case of non-life insurer and
sixty per cent in case of life insurer. |
|
(t) |
Loans to any person or group of related persons |
Two
and half per cent for both life and non-life insurers.
|
(2) Where regulations issued under this rule, or any
amendment to such regulations, reduces the amount or
proportion of assets which may be held in a particular form
by insurers, those regulations or that amendment shall not
come into effect until one year from the date at which the
change to regulations is published, unless the Commission is
satisfied on reasonable grounds that earlier application is
warranted for the protection of policyholders or to deal
with an actual or apprehended breach of the Ordinance or the
rules made thereunder.
11. Valuation.- For the purposes of sub-section
(3) of section 34 of the Ordinance, where an amount referred
to in sub-section (1) of that section cannot be reliably
determined by reason of the absence of relevant information
on which to base a determination, an insurer may perform a
valuation based on the present value of the expected future
cash flows pertaining to an asset or a liability, as the
case may be, and in determining the present value a discount
rate appropriate to the timing of the future cash flows
shall be used.
12. Minimum required assets in statutory fund.-
For the purposes of sub-sections (3), (4) and (5) of section
35 of the Ordinance, policyholder liabilities shall be
determined by the Commission, by notification in the
official Gazette:
Provided that where sub-section (6) of section
50 applies in respect of a statutory fund, policyholder
liabilities for the purposes of the said sub-sections shall
not be less than the amount determined by the appointed
actuary under that sub-section.
13. Solvency of non-life insurer.- (1) For the
purposes of clause (a) of sub-section (3) of section 36 of
the Ordinance, the following shall be the prescribed amount,
namely:-
(a) In the case of an insurance company registered after
the commencement date, fifty million rupees; and
(b) in the case of an insurance company registered at the
commencement date-
(i) the amount applicable under the repealed Act,
until the 31st December, 2002;
(ii) fifteen million rupees until the 31st December,
2003;
(iii) twenty-five million rupees until the 31st
December, 2004; and
(iv) fifty million rupees until the 31st December,
2005, and thereafter.
(2) For the purposes of clause (b) of sub-section (3)
of section 36 of the Ordinance, the following shall be the
prescribed percentage, namely:-
(a) In the case of an insurance company registered after
the commencement date, twenty per cent; and
(b) in the case of an insurance company registered at the
commencement date-
(i) ten per cent until the
31st December, 2002;
(ii)
fifteen per cent until the 31st December, 2004; and
(iii) thereafter the percentage as set out in
clause (a) of this sub-rule.
(3) For the purposes of clause (c) of sub-section (3)
of section 36 of the Ordinance, the following shall be the
prescribed percentage, namely:-
(a) In the case of an insurance company registered
after the commencement date, twenty per cent; and
(b) in the case of an insurance company registered at
the commencement date-
(i) ten per cent
until the 31st December, 2002;
(ii)
fifteen per cent until the 31st December, 2004; and
(iii)
thereafter the percentage as set out in clause (a) of this
sub-rule.
14. Loans to employees and agents.-
(1) For the
purposes of sub-section (8) of section 37 of the Ordinance,
an insurer may, at its discretion, grant to an employee or
an agent of the insurer a loan or temporary advance, not
otherwise prohibited or provided for by the Ordinance, as
follows, namely:-
(a) A life insurer may grant a loan on a life insurance
policy issued by that insurer to an employee or an agent of
that insurer, of not more than the surrender value of that
policy;
(b) an insurer may grant to an employee or an agent of
that insurer a loan on mortgage of immovable property,
provided that-
(i) the amount of the loan does not at any time
exceed fifty per cent of the value of the property or, if
the purpose of the loan is to construct a house, fifty per
cent of the sum of the value of the land and the amount paid
or contracted to be paid to date for such construction;
(ii) the loan is repayable within a period of not more than
fifteen years; and
(iii) the amount payable by the employee or an
agent in repayment of such loan in any one year, including
principal and profit or return (whatever called or
described) does not exceed (in the case of an employee) one
third of the total remuneration of the employee from the
insurer during the most recent year or (in the case of an
agent) one-fourth of the total renewal commission payable to
the agent by the insurer in respect of the most recent year;
(c) an insurer may grant to an employee or an agent of
that insurer a loan for the purchase of a conveyance,
provided that-
(i) the employee or an agent has served the insurer
continuously for a period of not less than three years, in
case of an employee, and five years, in case of an agent, as
at the date at which the loan is granted;
(ii)
the conveyance purchased is mortgaged to the insurer;
(iii) the
loan is repayable within five years; and
(iv) the
total amount of the loan (in case of an employee) does not
exceed the total remuneration of the most recent year of the
employee and (in case of an agent) total renewal commission
payable to the agent by the insurer in respect of the most
recent year;
(d) an insurer may grant to an employee of that insurer a
temporary loan or advance to meet fees and expenses
associated with the completion of a course of study by that
employee, provided that-
(i) the employee has served the insurer continuously
for a period of not less than two years; and
(ii)
the course of study is offered by-
(a) a college or university or institution in Pakistan or
a college or university or institution outside Pakistan
which offers distance learning program to students resident
in Pakistan, provided in each case, the college or
university or institute is recognized by the University
Grants Commission or by any other authority constituted by
the Federal Government for this purpose; or
(b) the Pakistan Insurance Institute (PII) or an
insurance institute affiliated to that Institute; or
(c) the Chartered Insurance Institute in the United
Kingdom (CII); or
(d) an insurance industry association approved for the
purposes of this clause by the Commission; or
(e) all courses offered by the Institute of Actuaries,
United Kingdom; or
(f) the Institute of Chartered Accountants of Pakistan (ICAP);
or
(g) the Institute of Cost and Management Accountants of
Pakistan (ICMAP); or
(h) the Institute of Chartered Accountants England and
Wales (ICEAW); or
(i) the Institute of Chartered Management Accountants (CIMA),
United Kingdom; or
(j) the Association
of Chartered Certified Accountants (ACCA); or
(k) the Institute of Certified Public Account (CPA), USA;
or
(l) the Institute of Internal Auditors (IIA), USA; or
(m) the Institute of Chartered Financial Analyst (CFA),
USA; or
(n) all courses offered by the Institute of Life Office
Management Association (LOMA) including the Chartered Life
Underwriters (CLU), USA; or
(o) all courses offered by the Society of Actuaries (SoA),
USA; or
(p) such other body as may be specified by the
Commission, by notification in the official Gazette;
(iii) the loan is repayable within five years of
the date of grant of loan; and
(iv) the amount of the loan does not exceed one
half of the total remuneration of the employee from the
insurer during the most recent year;
(e) an insurer may grant to an employee of that insurer a
temporary loan or advance, provided that-
(i) the loan is repayable within twelve months;
and
(ii) the amount of the loan does not exceed
one-sixth of the total remuneration of the employee from the
insurer during the most recent year; and
(f) an insurer may grant an employee of that insurer
house rent advance not exceeding six months basic pay of the
employee, provided that-
(i) the amount of advance is payable within
twelve months from the date of grant of such advance; and
(ii) the employee has served the insurer
continuously for a period not less then two years.
(2) A reference in this rule to the amount of a loan or
advance or the amount payable in a year includes principal
and profit or return, whatever called or designated, and
refers to the nominal amount of the loan or advance and not
to any lower amount which may be ascribed to that loan for
the purposes of section 34 or 46 of the Ordinance.
(3) Loans shall be granted in such a way that the
total amount of repayment under all loans under this rule
shall not exceed fifty per cent of total remuneration of the
employee or fifty per cent of the average monthly renewal
commission of the agent for the most recent year.
(4) Recovery of a loan from the employee or agent
shall not be deferred in any case.
(5) The fact that a loan or advance is permitted
under this rule does not imply that-
(a) an insurer is obliged to grant such a loan or
advance;
(b) the granting of such a loan or advance relieves an
insurer from any liability or obligation in respect of that
loan or advance or in respect of its business generally to
which it is subject by reason of the Ordinance; or
(c) such a loan or advance is an admissible asset of the
insurer for the purposes of determination of the net
admissible assets of the insurer for solvency purposes.
15. Requirement to effect and maintain reinsurance
arrangements.- (1) For the purposes of
sub-sections (2) and (3) of section 41 of the Ordinance, the
following information shall be submitted in respect of each
reinsurance arrangement by the 31st January of each year,
namely:-
(a) Type of reinsurance treaty;
(b) number of lines or slabs, as the case may be;
(c) insurers maximum retention;
(d) maximum liabilities under total reinsurance treaty;
(e) estimated premium income;
(f) aggregate commission loss limit, if any;
(g) commission ;
(h) profit commission;
(i) over riding commission;
(j) name and addresses of re-insurers with their
respective shares and their rating by reputable
international rating agencies;
(k) maximum liabilities of each reinsurer; and
(l) name and addresses of broker who placed reinsurance.
(2) If the insurer’s retention is based on maximum
probable loss the maximum liabilities of each reinsurer must
be stated, including maximum liability under the total
reinsurance treaty and a separate statement for each class
or sub-class of business shall be furnished.
16. Accounting and reporting.- For the purposes of
sub-sections (1) and (2) of section 46 of the Ordinance, the
statements as set out in Annexure II shall be furnished.
17. Additional copies. - (1) For the purposes of
sub-sections (1) and (2) of section 47 of the Ordinance, the
number of additional copies required to be delivered shall
be one, which shall be delivered in printed form to the
Insurance Division of the Commission.
(2) For the purposes of sub-section (4) of section 47
of the Ordinance, one translation either into the English or
Urdu language shall accompany each copy in the original
language required to be delivered, and that translation
shall be duly attested.
18. Fees for special audit.- (1) The fees payable
under sub-section (4) of section 49 of the Ordinance to an
auditor for a special audit shall be such as may be
determined by the Commission on case-to-case basis.
(2) The Commission shall in determining such fees
have regard to, without limitation-
(a) the size of an insurer and the complexity of the
business of the insurer;
(b) the quality of the books and records of the insurer;
(c) the nature of the considerations which led the
Commission to direct that the special audit be performed and
the impact of such considerations on the risk of material
error in the company’s records and returns and the
difficulty of performance of the special audit;
(d) the seniority and experience of the persons involved
in the special audit;
(e) the amount of time necessarily expended on the
special audit;
(f) the amount of money disbursed as expenses in the
conduct of the special audit; and
(g) the fees ordinarily charged for specialist
auditing services.
19. Financial condition report.- For the purposes
of section 50 of the Ordinance, the following shall, without
limitation, be included in a Financial Condition Report
prepared by an actuary in respect of a life insurer,
namely:-
(a) The date as at which the valuation of policyholder
liabilities was performed;
(b) the statement required under sub-section (3) of
section 50 of the Ordinance;
(c) a statement of any reservations or qualifications to
which the report is subject, including any material matters
in which the appointed actuary has been unable to comply
with any relevant professional standards to which the
appointed actuary is subject by virtue of his membership of
an actuarial institute, faculty, society or association;
(d) a brief description of-
(i) the business underwritten by the life insurer,
and the statutory funds in which it is written;
(ii)
the reinsurance arrangements of the life insurer;
(iii) the
assets of the life insurer;
(iv) the
investment policy of the life insurer;
(v)
the unit pricing policy of the life insurer (where
applicable); and
(vi) such
other matters relating to the business of the life insurer
as the appointed actuary believes should be brought to the
attention of the life insurer;
(e) a statement of the appointed actuary’s opinion on the
adequacy of premium rates and charges in respect of policies
underwritten by the insurer;
(f) a statement of the appointed actuary’s valuation of
policyholder liabilities according to the minimum valuation
basis prescribed under sub-section (5) of section 50
including details of-
(i) the general principles adopted in the
valuation of each class of business and group of policies in
force at the valuation date;
(ii) the reasons for adoption of those general
principles;
(iii) the methods adopted in the valuation;
(iv) policies which under the valuation methods
would be treated as an asset, and actions taken to identify
and eliminate such assets from the valuation;
(v) bases adopted for mortality and morbidity;
and
(vi) currency exchange rates adopted in the
translation of liabilities denominated in foreign currency;
(g) where sub-section (6) of section 50 applies, a
statement of the appointed actuary’s valuation of
policyholder liabilities under that sub-section;
(h) a statement of the appointed actuary’s determination
of the surplus, surplus arising on participating life
insurance business, if any, surplus adjustment, if any, and
expense adjustment, if any; and
(i) a statement by the appointed actuary, expressing an
opinion as to whether-
(i) the basis of apportionment of revenues and
expenses between the statutory and other funds of the life
insurer, and between classes of policy holder within
statutory funds, is fair and equitable;
(ii) the surplus attributed to participating
policyholders has been determined in accordance with the
Ordinance;
(iii) in relation to each statutory fund of the
insurer, the insurer has complied, on the valuation date,
with the provisions of so many as are applicable of
sub-sections (3), (4) and (5) of section 35 of the
Ordinance, relying on the audited statements of admissible
assets; and
(iv) the life insurer has adequate capital to
continue its business at planned levels for a period of not
less than five years.
20. Minimum valuation basis.- (1) For the
purposes of sub-section (5) of section 50 of the Ordinance,
the minimum valuation basis shall be such as is determined
by the Commission, by notification in the official
Gazette.
(2) Until the issue of a notification under
sub-rule (1), the minimum valuation basis shall be that
applicable under the repealed Act immediately before the
commencement date of the Ordinance.
21. Financial Statements of Life Insurance
Companies. (1) For the purposes of section 52 of the
Ordinance, the statements required to be filed by life
insurers under the Companies Ordinance,1984 (XLVII of 1984),
shall be as set out in Annexure II.
(2) The Commission may, by notification in the official
Gazette, not inconsistent with these rules, provide for
accounting and presentation procedures for preparing
financial statements under this rule, and the basis of
calculation of any amount or ratio required under this rule
to be included in any statement forming a part of those
financial statements.
22. Amalgamation and transfer of life insurance
business.- The statement of assets and liabilities
required under clause (b) of sub-section (3) of section 68
of the Ordinance shall be made as set out in Annexure I.
23. Compliance visiting.- (1) This rule refers to
the powers given to the Commission to conduct compliance
visits under section 84 and 110 of the Ordinance.
(2) A compliance visit by the Commission or a
delegate of the Commission to the premises of an insurer, an
agent, or a broker (‘party visited’) shall not constitute an
investigation or an audit under the Ordinance.
(3) The Commission shall give not less than two
week’s written notice of an intention to perform a
compliance visit, and shall have regard to the convenience
of the party proposed to be visited in setting the date,
time, place and duration of the visit:
Provided that if the Commission believes on reasonable
grounds that waiver of notice is necessary to prevent breach
of the Ordinance, or to prevent concealment of evidence of
actual or apprehended breach of the Ordinance, the period of
notice may, with the consent of the Chairman of the
Commission, be reduced to twenty-four hours.
(4)
The notice of a visit shall set out the provision or
provisions of the Ordinance, rules or regulations in respect
of which it is proposed to verify compliance.
(5) A visit under this rule shall not be carried out
in such a way as to disrupt unduly the operations of the
party visited.
(6) A party visited shall not be visited again under
this rule until the elapse of not less than six months from
the termination of the previous visit, except to the extent
that the Commission believes on reasonable grounds that a
subsequent visit is necessary to satisfy it that appropriate
action is being taken to remedy a defect noted on a
compliance visit.
(7) A party visited shall co-operate fully with the
Commission in the conduct of compliance visit, and shall
make available such books and records, information and
explanations as the Commission may reasonably require.
(8) The Commission shall give to a party visited,
within one month following the completion of compliance
visit, a written report on the results of the compliance
visit.
(9) The party visited shall, if the Commission so
requires, respond to the written report referred to in
sub-rule (8) within one month following receipt by the
visited party of the report.
(10) The Commission may have regard to the results of a
compliance visit in deciding whether to take any action in
respect of a party visited under powers given to the
Commission or to the Federal Government under the Ordinance,
rules or regulations; provided that no such action shall be
taken without giving the party visited an opportunity to be
heard.
24. Independent insurance survey to be conducted.- (1) Subject to sub-rule (2), for the purposes of
sub-section (1) of section 85 of the Ordinance, the
Commission, may direct the insurer to arrange for an
independent or another survey of the loss through another
surveyor or surveyors approved by the Commission, if in case
the Commission has reason to believe that an insurance
surveyor has given a false report or has grossly
over-assessed or under-assessed a loss or has made an
adjustment of loss in a grossly unjust manner.
(2) Independent survey shall be conducted in respect of
the claim lodged for the amount exceeding fifty thousand
rupees except in case of motor and casualty insurance where
the amount of loss or claim is for more than twenty-five
thousand rupees.
25. Conduct of agents and insurer.-
(1) For the purpose of sections 96 to 99 of the Ordinance,
the following actions of an agent shall be treated as
violations of the Ordinance, and the agent shall be
disqualified from engaging into the business of insurance
agency for a period of five years, namely:-
(a) Acts as agent in breach of any of the sub-sections of
section 96;
(b) holds the property or other documents and cover notes
of the previous insurer after entering into the contract of
agency with the new insurer;
(c) fails to pass on the payment received from the
policyholder to the insurer within the prescribed time as
per sub-section (2) of section 99; and
(d) receives from or pays to a policyholder or intending
policyholder any sum in relation to the contract of
insurance without prior approval of the insurer in violation
of sub-section (3) of section 99.
(2) For the purposes of sections 96 to 99, the
following actions of an insurer shall be treated as
violations of the Ordinance, and the insurer shall be liable
to penalty as per section 156 of the Ordinance, namely:-
(a) Appoints a person as an agent in breach of any of the
sub-sections of section 96;
(b) fails to take action as provided in sub-rule (3) on
the written complaint of the policyholder or intending
policyholder within a period of one month;
(c) knowingly permits a disqualified agent to obtain and
operate another contract of insurance agency in the name of
another person or close relative who is not an active
insurance agent;
(d) pays commission or other remuneration to an agent in
violation of sub-section (5) of section 99; and
(e) fails to disqualify an agent found guilty of offence
under sub-rule (1).
(3) On receipt of a written complaint from the
policyholder or intending policyholder that an agent or any
other person related to the agent has received money in
relation to a contract of insurance from the complainant and
the agent has failed to deposit this money with the insurer,
the insurer shall conduct an inquiry into it and inform the
policyholder or intending policyholder, as the case may be,
about the outcome of the inquiry within one month period of
the complaint.
26. Qualifications required of insurance agents.- For the purposes of section 97 of the Ordinance, the
following shall be the prescribed qualifications, namely:-
(a) For persons holding licence of insurance agent or
certificate of employer of agents under the repealed Act,
there shall be no prescribed qualifications; and
(b) for persons entering into agency contracts after
commencement of the Ordinance, the minimum qualification
shall be Matriculate or Secondary School Certificate, and in
the case of a natural person, that person, or in the case of
a body corporate, each director, or in the case of a
partnership, each partner, shall have the said
qualification, and -
(i) agents operating in the non-life insurance
business shall be required to complete the foundation course
of the Pakistan Insurance Institute, with in a period of
three years; and
(ii) agents operating in the life insurance business shall
be required to complete a foundation course of three months
durations, to be organized by the concerned insurance
company.
27. Reporting by insurance brokers.-
(1) Each year an
insurance broker shall be required to provide to the
Commission, as at the preceding 31st December, or in respect
of the year then ended -
(a) a balance sheet of the company;
(b) a profit and loss account of the company;
(c) a statement of the insurance premium written through
the broker, distinguishing between premium in respect of
which the broker had an agency agreement with the insurer,
subdivided by classes of insurance business, and premium in
respect of which the broker did not have an agency agreement
with the insurer; subdivided by classes of insurance
business; and
(d) a statement of the commission or brokerage, by
whatever name called, receivable by the broker, subdivided
by classes of insurance business, distinguishing between
commission earned on premium in respect of which the broker
had an agency agreement with the insurer, and commission
earned on premium in respect of which the broker did not
have an agency agreement with the insurer.
(2) The Commission may, on the application of a
broker, approve a date other than the 31st
December, for the date as at which the statements shall be
required to be made up for the purposes of sub-rule (1).
(3) The statements referred to in this rule shall be
provided to the Commission not later than four months after
the date to which they are made up.
28. Misrepresentation by life insurers.- (1)
Subject to sub-rule (2), no life insurer shall -
(a) make, issue, circulate or cause to be made, issued or circulated,
any estimate, illustration, circular or statement
misrepresenting the terms of any policy issued or to be
issued or the benefits or advantages promised thereby or
the bonuses, shareholders’ dividends or share of the
surplus to be received thereon, or make any false or
misleading statement as to the bonuses, shareholders’
dividends or share of surplus previously paid on similar
policies or make any misleading representation or any
misrepresentation as to the financial condition of any
policyholder insured in any company for the purpose of
inducing or tending to induce such policyholder to enter
into, allow to lapse, forfeit or surrender his insurance
policy; or
(b) make, publish, disseminate, circulate or place
before the public, or cause, directly or indirectly, to be
made, published, disseminated, circulated or placed before
the public in a newspaper, magazine or other publication, or
in the form of a notice, circular, pamphlet, letter or
poster or in the electronic media or in any other manner an
advertisement, announcement or statement with respect to the
business of insurance, or the financial position of any
insurer or with respect to any person in the conduct of his
insurance business, which is false, untrue, deceptive,
misleading or calculated to injure any person engaged in the
business of insurance.
(2) Nothing contained in sub-rule (1) shall prevent
an insurer from publishing any return in a form in which it
has been furnished to the Commission or a true and accurate
abstract from such returns.
29. Power of the Commission to provide for matters
in respect of promotional material and policy
documentation.- (1) The Commission may, by notification
in the official Gazette, not inconsistent with the
provisions of the Ordinance, provide for matters in relation
to any promotional material or policy documentation issued
by a life insurer, including but not limited to the form and
content of that material or documentation and the form and
content of any notices which that material or documentation
shall contain.
(2) A notification issued under sub-rule (1) shall
have regard to the information needs of policyholders and
their capability of understanding information provided to
them.
(3) For the purposes of this rule,-
(a) “promotional material” means any document or
advertisement that contains statements that may affect a
person’s decision to enter into, vary or continue a life
policy, or a particular type of life policy; and
(b) “policy documentation” includes contracts,
endorsements and proposal documentation.
30. Power to require withdrawal of materials used
for communication.- The Commission may require any
person carrying on such activities in Pakistan to withdraw
any written, electronic or other material issued by it for
mass communication or communication with a policyholder or
prospective policyholder including a policy or proposal
document -
(a) if it includes any matter which is, in the opinion of
the Commission, likely to mislead a policyholder or a
prospective policyholder; or
(b) if it is, in the opinion of the Commission,
misleading by omission, ambiguous or couched in obscure
language.
31. Liability for insurance advice.- Where
insurance advice is given in writing to a person by an
insurer, an agent of an insurer or an insurance broker, that
advice shall have regard to the circumstances of the person,
and where that advice is not reasonable having regard to
those circumstances, and where it is reasonable for the
person receiving the advice to rely upon it, the person
receiving the advice shall be entitled to recover (in the
case of an insurer or an agent of an insurer), from the
insurer or broker, as the case may be, any loss or damage
directly suffered by him as a result of following or acting
upon the advice in good faith. The burden of proving that
due regard was given to the circumstances of the
policyholder and that the advice was reasonable under the
circumstances shall rest with the insurer or broker.
32. Policyholder’s duty of disclosure.- (1) A
proposal form provided to a prospective policyholder shall
carry or contain a notice of his duty of disclosure stating
the consequences of non-disclosure.
(2) If an insurer fails to comply with the provisions
of sub-rule (1), the insurer shall not be able to rely upon
non-disclosure by the policyholder (other than fraudulent
non-disclosure) as grounds for refusing to pay a claim or
for diminishing a claim which is otherwise payable.
33. Duty of life insurer to provide certain
information.- (1) A life insurer shall provide to an
intending policyholder under a policy the terms of which or
the provisions of the Ordinance provide for it to acquire a
surrender value, at or before the commencement of the
policy, a clear statement of the expected surrender values
on the policy at one year from the commencement of the
policy and at subsequent dates at an interval of one year,
for a period of not less than ten years or if earlier until
maturity, and the assumptions on which those expected
surrender values are based.
(2) A life insurer shall provide to the intending
policyholder a clear statement of the options available to
the policyholder should the policy holder not maintain
premium payments:
Provided that this statement shall not be required in
respect of a life insurance policy under the terms of which
the premium is payable once only.
(3) The Commission may, by notification in the
official Gazette, not inconsistent with the provisions of
the Ordinance, provide for any matters relating to the form
and content of the notices provided to an intending
policyholder under this rule, including but not limited to
–
(a) the assumed investment earnings rates and in the case
of participating policies bonus crediting rates on the basis
of which surrender values included in such notices are
calculated;
(b) the assumed expense rates on the basis of which
surrender values included in such notices are calculated;
and
(c) the inclusion in such notices of words in a form as
required by such notification.
34. Unit valuations.- (1) Subject to sub-rule
(2), a life insurer offering investment-linked policies
shall publish, in a newspaper having general circulation,
not more than ten days following the last day of each month,
the values attributed by it to units for the purpose of
redemption of units by policyholders at close of business on
the last working day of that month.
(2) Where a life insurer offering investment-linked
policies publishes the values attributed by it to units for
the purpose of redemption of units by policyholders more
frequently than is required by sub-rule (1), that insurer
shall not be required to publish the information as at close
of business on the last working day of a month provided that
–
(a) information referred to in sub-rule (1), made up as
at close of business on a date not more than five days prior
to the last working day of that month or not more than five
days after the last working day of that month, is published
in a newspaper having general circulation; and
(b) the information is published not more than ten days
following the date as at which it is made up.
35. Insurance policy not to be avoided for
non-payment of premium.- (1) No insurance policy shall
be liable to be avoided on the ground that the premium
has not been paid.
(2) Nothing in this rule shall prevent the inclusion
in a policy of a provision to the effect that cover under
the policy shall not commence until the premium has been
paid or guaranteed to be paid in such manner as may be set
out in the policy or otherwise accepted or agreed to by the
insurer.
36. Endorsements.- No endorsement to a policy,
which has retrospective effect, may be made without the
express consent in writing of the policyholder.
37. Effect of averaging provision in domestic
insurance policy.- (1) Subject to sub-rule (2), the
operation of an averaging provision in a domestic insurance
policy shall be limited to cases in which the amount of the
sum insured is less than eighty per cent of the value of the
property insured at the time of taking out the policy, and
to cases in which the amount of the loss is greater than
five per cent of the sum insured. The value of the loss to
be paid shall be determined according to a sliding scale
such that one hundred per cent of the loss is payable when
the sum insured is eighty per cent of the value of the
property, and the amount of the loss payable is reduced by
one and a quarter per cent for each percentage point below
eighty per cent that the sum insured bears to the value of
the property insured at the time of taking out the policy.
(2) Nothing contained in sub-rule (1), shall prevent
an insurer from inserting an averaging clause, which is more
favourable to the policyholder.
38. Insurer’s duties when claim denied.- (1) An
insurer shall, whenever a claim is denied, provide the
policyholder with a written statement of reasons for denial
of the claim.
(2) Where refusal to pay a claim, in whole or in
part, is based, in whole or in part, upon a survey report,
the policyholder shall be provided, at his option, with a
copy of the survey report.
39. Free look period for life insurance.-
(1)
A life insurance policy, not being a group life insurance
policy, and the term of which is for more than one year,
shall be liable to be cancelled at the option of the
policyholder within fourteen days of commencement, and if
the policyholder cancels the policy within that time all
amounts paid by way of premium shall be refunded without any
deduction for management expenses, other than expenses
incurred in connection with the medical examination of any
person insured under the policy.
(2) No person shall offer any inducement to a
person for the purposes of procuring that person to cancel
his policy in accordance with this rule.
(MOHAMMAD HAYAT JASRA)
Executive Director
No. F.7(1)T/(I)/2000]
Annexure 1
Annexure 1 (Life forms)
Annexure 1 (Non Life forms)
Annexure 2
Annexure 2 (Accounting
Regulations)
Annexure 2 (Life Accounting Forms)
Annexure 2 (Auditors Report Life)
Annexure 2 (Non Life Accounting
Forms)
Annexure 2 (Auditors Report Non
Life)
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