The Securities and Exchange Commission of Pakistan (SECP) will make it mandatory for the insurance companies to establish an industry-wide guarantee fund to protect the interests of policyholders under the draft Insurance Bill 2016. Sources told Business Recorder here on Friday that the Draft Insurance Bill also provides provisions related to establishment of an industry-wide guarantee fund.
The guarantee fund would be a pool of funds created to provide payment of policy benefits in case of insolvency of any life insurer and may be formed through mandatory participation of all life insurers. The said industry-wide guarantee fund would address the issue of systemic risk in insurance industry, they added. According to the draft Insurance Bill 2016, a new section 152 (Guarantee fund for Life Insurer's insolvency) has been proposed. The Commission may prescribe the requirements regarding establishment, conduct and manner of operation of guarantee fund for the life insurers' insolvency.
The guarantee fund for the life insurers' insolvency means the pool of funds created to provide for payment of policy benefits in case of insolvency of life insurer and is formed through mandatory participation of all life insurers. The Commission may require the life insurers registered under this Act to become member of guarantee fund for insurer's insolvency and contribute such amounts to the fund, as the Commission may specify.
The Commission may prescribe the fee to be paid by life insurers at such time and in such manner as may be prescribed for development of the guarantee fund; management and operation of the guarantee fund and any other matter as may be prescribed, it added.
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