SECP Invites comments on framework for guarantee business

ISLAMABAD: June 9: In order to consult the stakeholders, the Securities and Exchange Commission of Pakistan (SECP) has issued Draft Credit and Suretyship (Conduct of Business) Rules, 2016 vide S.R.O.511(I)/2016. The draft rules are aimed at formulating a comprehensive framework to regulate the guarantee business, thereby ensuring maximum protection of the interests of the insurance policyholders and at gaining confidence of the public.

The purpose is to increase insurance penetration in Pakistan. The framework has been devised in such a manner so as to limit the risk exposures taken on by the insurers with respect to guarantees issued by them. After promulgation of these Rules insurers shall be required to procure specified forms of collaterals and also maintain special reserve (called the contingency reserve) well in advance so that they do not find it cumbersome to honor the guarantees as and when any of these guarantees are called.