ISLAMABAD: The Petroleum Division has submitted a summary to the Cabinet to an amendment in Section 166 (3) of the Insurance Ordinance, 2000, to get exemption for state-owned oil and gas companies from mandatory insurance from the National Insurance Company Limited (NICL).
Section 166 (3) of the Insurance Ordinance, 2000, provides that all insurance business relating to any public property, or to any risk or liability pertaining to public property, shall be placed with the NICL only, and shall not with any other insurer.
The NICL is the only state-owned company, under the administrative control of the Ministry of Commerce, which is involved in non-life insurance business.
The secretary Petroleum Division briefed a parliamentary panel that the financial size of the NICL was not too big to insure billions of rupees worth assets of oil and gas companies that come under the administrative control of the division.
According to the website of the NICL, the Oil and Gas Development Company Ltd (OGDCL), Pakistan Petroleum Limited (PPL), the Pakistan State Oil (PSO), the Sui Northern Gas Pipeline Limited (SNGPL), the Sui Southern Gas Company (SSGCL), and the Pak Arab Refinery are the companies that are insured by the NICL.
The Competition Commission of Pakistan (CCP) has already observed that this statutory monopoly of the NICL harms competition in the insurance market.
In this case, the government is the direct consumer, and is denying itself the benefits of competition such as improved quality of service and competitive premiums.
In December 2019, expressing serious reservations over higher insurance rates against the open market in lieu of insurance of public projects and the monopoly of the NICL, the Punjab government also demanded an amendment in the Insurance Ordinance, 2000.
After the approval of the federal government, the provincial government will also hold a consultation in the Cabinet for setting up a provincial insurance company.
In its letter to the federal government, the Punjab government stated that owing to the monopoly of the NICL, together with costly insurance rates, there has been a loss of Rs 1.2 billion in the past, sources said.
Copyright Business Recorder, 2020