Transcription

1 Insurance Year Book 14

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3 INSURANCE YEAR BOOK 2014 Published By The Insurance Association of Pakistan , 17th Floor Saima Trade TowerA I.I. Chundrigar Road P.O. Box No Karachi 70 Tel: (9221) Fax: (9291) Website:

4 Vision Statement To be a forum of active exchange on matters relating to insurance. To promote, support and protect common interest of member companies carrying on the business of insurance in Pakistan and to endeavor to increase insurance awarness and penetration in the country.

5 1. The Insurance Association of Pakistan CONTENTS 2. Chairman's Message 05 Message from Chairman,The Insurance Association of Pakistan, Mr. Muhammad Ali Zaib Executive, Technical & Regional Committees Activities 07 Executive Committee 09 Regional Committee North 11 Accident Committee 13 Property Committee 15 Marine Committee 16 Life Committee Market Overview of Non Life Insurance Industry in Pakistan Market Overview of Life Insurance Industry in Pakistan Company Profiles 25 Non Life & ReInsurance Companies 1. ACE Insurance Limited Adamjee Insurance Company Limited Alfalah Insurance Company Limited Alpha Insurance Company Limited Asia Insurance Company Limited Askari General Insurance Company Limited Atlas Insurance Limited Century Insurance Company Limited Cooperative Insurance Society of Pakistan Limited Crescent Star Insurance Company Limited East West Insurance Company Limited EFU General Insurance Limited Excel Insurance Company Limited Habib Insurance Company Limited IGI Insurance Limited Jubilee General Insurance Company Limited New Hampshire Insurance Company 64 03

6 18. The Pakistan General Insurance Company Limited PICIC Insurance Limited Premier Insurance Limited Pakistan Reinsurance Company Limited Reliance Insurance Company Limited SPI Insurance Company Limited Security General Insurance Company Limited Shaheen Insurance Company Limited Silver Star Insurance Company Limited TPL Direct Insurance Limited UBL Insurers Limited United Insurance Company of Pakistan Limited 92 Life Insurance Companies 1. Adamjee Life Assurance Company Limited Asia Care Health & Life Insurance Company Limited 3. East West Life Assurance Company Limited EFU Life Assurance Limited IGI Life Insurance Company (Pakistan) Limited Jubilee Life Insurance Company Limited Members' Directory Pictorial Presentation of IAP events 129 Annual General Meeting (AGM) 130 Annual Dinner 131 Insurance Day 133 Presentation on Window Takaful made by SECP 134 Presentation on Act only Insurance made by Accident Committee 135 Marine Committee study visit to Wahgah Border 136 Cricket Tournament Notes

7 MESSAGE

8 Muhammad Ali Zeb CHAIRMAN THE INSURANCE ASSOCIATION OF PAKISTAN First of all, I would like to extend my sincere appreciation to all members for their interest and support to the Insurance Association of Pakistan (IAP). n n Introduced Carrier's Breach of Trust Exclusion Clause. Finalized the precise version of RSD Clause. It is indeed a pleasure for me to present the IAP's Year Book for 14 which contains important data and analysis of the insurance industry in Pakistan The year registered premium growth on the nonlife insurance side by 10% to Rs billion compared to Rs billion in The growth in the life insurance business was 15% to Rs..00 billion compared to Rs billion in Given hereunder are some important developments that took place during the year. n Celebrated 2nd Insurance Day in Pakistan on 6th May n n n Guidelines / Rules were updated by the Technical Committees. Construction of IAP House is expected to commence soon subsequent to requisite approvals from DHA. IAP rebranded its logo. It has been a great experience and honor for me to serve as Chairman IAP, and I acknowledge the support and assistance of the Executive Committee, Technical Committees and other Committees of IAP, the Secretary General, officers and staff of the Association at Karachi and Lahore for their hard work and commitment. n Further amendments are being done in Memorandum and Articles of Association of IAP as required by the Directorate General Trade Organizations. n Matter of Bank Limits and Enlistment of insurance companies on banks panels is being pursued with Pakistan Banks Association. n Made suggestions in respect to amendments proposed by SECP in Rule 35 of SECP (Insurance) Rules 2. n Proposals for Federal Budget on various tax related and other important matters were forwarded to the concerned authorities. n Matters relating to withholding tax and exemption of Sales tax on life and health insurance business were taken up with Sindh Revenue Board (SRB). As a result premiums received by an insurance company will no longer attract withholding tax. Similarly exemption on life and health insurance services rendered during the period from 1st July 2014 to 30th June 2015 has been allowed. n Proposal for introduction of Act Only LiabilityNo Fault Model has been submitted to Commissioner Insurance SECP. 06

9 EXECUTIVE, REGIONAL & TECHNICAL COMMITTEES ACTIVITIES

10 SUMMARY OF THE ACTIVITIES OF EXECUTIVE COMMITTEE DURING THE YEAR 2014 EXECUTIVE COMMITTEE n Following to various efforts made by the IAP regarding enlistment of insurance companies on banks panels, recently a meeting has been held with PBA wherein it has been agreed that IAP & PBA would work together to draft a criteria for enlistment of insurance companies and assignment of limits to them by the banks. A Seminar will also be conducted jointly by the IAP & PBA to educate bank representatives to highlight factors Sitting from Left to Right: they should consider while Ms. Zehra Naqvi, Mr. Muhammad Rahat Sadiq, (Vice Chairman), Mr. enlisting insurance companies. The Muhammad Ali Zeb (Chairman), Mr. Atiq Anwar Mahmudi (Senior Vice efforts are underway for resolution Chairman), Mr. Hasanali Abdullah & Mr. Tahir Ahmed (ExOfficio) of this longstanding issue of the Standing from Left to Right: industry. Mr. N.A. Usmani (Secretary General), Syed Kazim Hasan, Mr. Ihtshamul Haq Qureshi, Mr. AfzalurRahman, Capt. Azhar Ehtesham Ahmed & Mr. n Subsequent to meeting of IAP Naim Anwar. representatives with Commissioner Insurance, SECP held on 29th July regarding Training of Insurance Agents, the Insurance Division issued a clarification dated 20th August, whereby suggestions made by the IAP were taken into account by the SECP. Since practical difficulties were still being faced particularly by the insurance agents of nonlife insurance companies in qualifying the agents foundation course further suggestions have been made to SECP. requires companies to reveal company's specific confidential information which can jeopardize the competitive advantage a company has over its competitors in local markets. Proposed procedure is lengthy, stringent and complicated. Section 41(1) of Insurance Ordinance 0 makes it mandatory that adequate reinsurance arrangements should be maintained at all times in the opinion of the directors to ensure continuing compliance with the provisions of the Ordinance. Reinsurance outside Pakistan as per Section 41(5) makes it further clear that no rules would apply which are inconsistent with Section 41(1) as above. Thus reinsurance is the sole responsibility of the insurer and any rule curtailing or restricting their obligations to ensure adequacy and to meet the requirements of the law would be contrary to the statutory provisions. It was felt that the matter was serious and SECP be asked to keep the matter pending till discussion and agreement on workable framework. n IAP's attention was drawn to letters/notices issued by the Sindh Revenue Board to various insurance companies in connection with chargeability of Sindh Sales Tax (SST) on reinsurance premium. The issue related to nonpayment of SST on reinsurance premium received by the company from other general insurance companies. The IAP wrote a detailed letter to SRB on 2nd May 2014 and its representatives met the Chairman, SRB. n The Commissioner (Insurance), SECP issued circular for the purposes of the manners of acceptance and placement of facultative reinsurance. The contents of circular were deliberated at the EC meetings and the following views/suggestions were emphasized: Facultative Request Note in its present form is not acceptable as it Thereafter, point wise reply highlighting the problems that the industry might face was sent to SECP with a request that the procedures laid down in their circular be deferred until the IAP is given an opportunity to discuss and finalize the matter. n The SECP in January 2014 proposed certain amendments in Rule 35 of SECP (Insurance) Rules 2 which were published in the official Gazette through SRO 66(I)/2014. The draft amendments were deliberated in the light of comments received from members by the EC at its meetings and suggested version of draft Rule 35 was submitted to Commissioner (Insurance), SECP. n The Taxation and Life Committees finalized the proposals for Federal Budget on various matters concerning the insurance 09

11 industry and were forwarded to Federal Board of Revenue, Punjab Revenue Authority, Khyber Pakhtunkhwa Excise & Taxation Department, Securities and Exchange Commission of Pakistan and Federation of Pakistan Chambers of Commerce & Industry. n Following to launch of Takaful Rules 2012, the takaful companies filed a petition in the High Court of Sindh challenging the Rules and obtained stay order. On 16th May 2014 the Honorable High Court disposed of the petition consequently vacating stay on the Rules. The conventional insurance companies may now commence window takaful operations. n Subsequent to procuring architectural services for the IAP's proposed building at DHA Karachi, the Committee in principle decided to add basement in building plan to make it B+G+4 storied building. The basement and ground floors may be rented out to some reputable financial institution which would be a source of additional income. In November, first conceptional layout plan was submitted by the architect which was approved by the EC with few suggestions. In December the architect submitted 3D views of front elevation of IAP proposed building. The Committee while considering the designs advised that the IAP should opt for the design which makes the building fully functional and economically viable, it should be a glass facade building having shop front on its ground floor. A subcommittee comprising of Mr. Tahir Ahmed, Mr. Hasanali Abdullah and Capt. Azhar Ehtesham Ahmed was formed to guide/assist IAP in matters relating to design/construction of IAP building. 6th May 2014 with more activities. The Day started with the publication of special supplements on insurance and insurance industry in the leading newspapers of the country. A number of panel discussions were organized in the educational institutions in Karachi and Lahore and also on Radio and TV Channels. Leading cricket teams (from Karachi and Lahore) played the Super Final Cricket match at Karachi to decide the ultimate Champion. An Essay Competition was also arranged, the top three winners were awarded prizes at IAP's Annual Dinner. n The Executive Committee has in principle decided to initiate an insurance awareness campaign. The proposed campaign will focus on highlighting the need/creating awareness of insurance. Promotion campaigns will be designed to prompt generic ideas on insurance as public service messages. n The IAP committees compiled suggestions on some other matters pertaining to insurance industry and submitted to the concerned authorities such as: Draft Amendments in the insurance Rules, 2 affecting the licensing provisions of direct Insurance Brokers Draft Bancassurance Regulations, Draft Surveying Rules Draft Unit Linked Products and Fund Rules 2014 Finance Bill 2014 Exemption of Sales Tax on life and health insurance Withholding Tax The subcommittee finalized the revised elevation views submitted by the architect. The detailed drawings have been submitted for necessary approvals by DHA. n In April 2014 it was decided that the IAP should have an astutely designed logo, therefore its existing logo be rebranded. In this regard services from a renowned firm namely BBCL were hired. The new logo was unveiled on 6th May n Third IAP Cricket Tournament was organized by the IAP Cricket Coordination Committee (CCC) at Karachi Parsi Institute, Saddar Karachi. Various member insurance companies participated in the Tournament. The final was played between EFU Life Assurance and New Hampshire Insurance, which was won by EFU Life. n This year the IAP celebrated second "Insurance Day" on the 10

12 SUMMARY OF THE ACTIVITIES OF REGIONAL COMMITTEE NORTH DURING THE YEAR 2014 The Regional Office North of The Insurance Association of Pakistan (RONIAP) having office at 188 A, Opp. Rehmania Park, ShadmanI, Lahore, completed its 42nd year of establishment on 31st December,. During the years, various matters including inspections of risks received the attention of Regional Committee North (RCN). The Association's Surveyor inspected 45 risks of textile mills in Punjab and Khyber Pakhtunkhwa. The Chartered Insurance Institute examinations were held in October, and April, 2014 under the supervision of RCN. REGIONAL COMMITTEE NORTH Standing from Left to Right: Mr. Muhammad Khurshid (Assistant Secretary), Syed Daood Ali Shah (Secretary) Mr. Muhammad Ikram, Mr. Liaquat Ali Khan (Chairman), Mr. Asif Mahmood Malik (ViceChairman), Mr. Tahseen Ahmed Khan, Mr. Mahboob Pervez, Mr. Abdul Haye & Mr. Muhammad Rahat Sadiq (EC's Observer) Mr. Muhammad ali zeb, Chairman, IAP explained the current issues and problems of insurance industry and the efforts being made by the IAP with the support of SECP to resolve them and to improve the performance of this sector. He also apprised that various new products have been introduced by the insurance companies to cater the needs of insurance market / insured and services are being improved further by the introduction of technology. In concluding remarks he appreciated the role of Mr. Muhammad Asif Arif as Commissioner (Insurance). n Second Insurance Day was celebrated at Lahore under the auspices of RCNIAP on 6th May, 2014, to bring insurance awareness amongst general public and to uplift the image of insurance as a whole. Two main events Seminar at AlHamra Art Council and a Panel Discussion on "Insurance Vision 2025" at Hailey College of Banking and Finance (HCBF) were held. Mr. Nasar us Samad Qureshi, Chairman, LII expressed his views about Microinsurance. He highlighted the new rules formulated by SECP and its role in the economy of Pakistan. He enumerated the various insurance products falling in this category and the future need for qualified human resources for the growth of insurance industry. The Seminar was presided by Mr. Muhammad Ali Zeb, Chairman IAP. Mr Muhammad Asif Arif, Commissioner (Insurance), SECP graced the occasion as the Chief Guest. After recitation from the Holy Quran and National Anthem Mr. Liaquat Ali Khan, Chairman, RCNIAP welcomed the distinguished guests and participants in good number from different segments of insurance industry including SLIC and students of Insurance and Risk Management from Hailey College of Banking and Finance. The Commissioner Insurance while addressing at the seminar highlighted the role of SECP as regulator of the insurance industry. He informed the participants about authorization of window takaful operation to the conventional insurance companies, formulation of new rules for Bancassurance, and Microinsurance its scope and benefits to the insurance industry and people having low income. Mr. Mohamed Ishaque Khan, a veteran and former Chairman, Lahore Insurance Institute (LII) highlighted the insurance penetration in Pakistan in comparison with other countries and emphasized the need to take drastic measures for reaching all segments of the society. Prof. Farah Naz Naqvi, the new Principal of Hailey College of Banking and Finance viewed that Hailey College of Banking and Finance will always try to produce qualified human resource for the insurance industry up to their expectations. Mr. Kaiser J. Khatana, Chairman, Institute of Road Safety Traffic Environment Pakistan (IRSTEP) made his presentation about Third Party Motor Insurance and Road Safety measures. Mr. M. Rahat Sadiq, CEO of United Insurance discussed the importance of Insurance Day and stressed the need to create awareness of insurance in general public. The Seminar was coordinated by Prof. M. A. Rufruf, DGM, Adamjee Insurance and as master of the ceremony. n In the evening at 4:00 p.m. a Panel Discussion on "Insurance Vision 2025" was held at the Hailey College of Banking & Finance. About 150 students of Insurance and Risk Management participated in this function. 11

13 Mr. Mohammad Ishaq Khan, the insurance legend presided over this session and mentioned few events and experiences of his life and how many people became successful by joining the insurance profession and by real hard work. The discussion was moderated by Mr. Muhammad Ikram, Regional Head North, Century Insurance. After recitation of Holy Quran. Mr. Liaquat Ali Khan, Chairman, RCNIAP presented his welcome address and thanked Prof. Farah Naz Naqvi, the Principal of Hailey College of Banking and Finance for helping the insurance industry on the occasion of Insurance Day and for invited large number of students of Insurance & Risk Management to participate. A rich tribute was paid to the late Prof. Khawaja Amjad Saeed, the Founder Principal of Hailey College of Banking and Finance. Mr. Nasar us Samad Qureshi, Chairman, LII stated that with the introduction of microinsurance in the country there will be great opportunities available for increase penetration of insurance in Pakistan. He added that the future of insurance industry is considerably dependent on brokers and agents. In the coming times large number of people will be employed in brokerage houses. Mr. Khurshid Ahmad, DGM, State Life discussed the current scenario of life insurance sector in Pakistan and the role being played by State Life. Mr. M. Rahat Sadiq, CEO, United Insurance enlightened the audience about the current penetration of insurance and its role in the economy of Pakistan. Prof. Farah Naz Naqvi, Hailey College Banking and Finance assured to continue cooperation and support to insurance industry to meet their human resource requirements. Mr. Satwat Mehmood Butt, DED, EFU General concluded this event by presenting vote of thanks to all the speakers and participants. n Hailey College of Banking & Finance in collaboration with the RONIAP organized HCBF Cultural Mela 2014 on 14th May, 2014 wherein many stalls were arranged for various entertainment items. One large stall was oraganized by IAP wherein the insurance companies placed their printed material and broachers which were distributed to the visitors. A large number of students of various disciplines participated in this event and showed their keen interest in the material and insurance products being offered there. Cash prizes through lucky draw were also awarded to HCBF students by the Secretary, RONIAP. executives of various insurance companies attended to watch this event. A friendly cricket match between veterans of HCBF & Insurance Companies was held. Souvenirs were awarded by the HCBF to the participating teams. n The SECP (Insurance Division) arranged a knowledge sharing session for authorization as Window Takaful Operators at IAP Office, Lahore on 30th May, which was attended by the executives from various insurance companies. n A workshop on "Risk Assessment Property & Business Interruption" was held on Monday, 16th September, at Regional Office North of IAP, Lahore. This workshop was conducted by Mr. M. Vaqaruddin, Faculty Member of Pakistan Insurance Institute, Karachi. The workshop was highly appreciated by the participants from various insurance companies in the North Region. n Lahore Insurance Institute organized free of cost preparatory classes for those candidates who were preparing for ACII examinations of October, and April, Mr. Zaulfiqar Ali Khan, Mr. Imran Yasin and Miss Farwah Ali Khan of EFU General Insurance had voluntarily offered their services for tutorial classes initially for core subjects at the institute. n Sports and Social Activities committee of LII organized in collaboration with RONIAP another spectacular event at Wapda Sports Complex on 1st December,. The Carnival was well attended by the executives and employees of most of the insurance companies operating in Lahore alongwith their families. Surveying companies also participated in this mega event with good attendance. n An indoor sports festival was organized. It was participated by various insurance companies in varied games including: Chess, Carrom, Table Tennis and Badminton. On a cool sunny morning of winter some out door activities were also organized. n Agent Foundation Courses were successfully held to meet the requirement of SECP in and The Surveyors Exams were also conducted in May, 2014 under the supervision of RCNIAP and LII. n Hailey College of Banking & Finance in collaboration with the RONIAP organized a Cricket Gala on 15th & 16th May, The 12

14 SUMMARY OF THE ACTIVITIES OF ACCIDENT COMMITTEE DURING THE YEAR 2014 n A meeting with Chief CPLC statistics of this business portfolio was held on 12th May 2014 which was attended by Chairman, Vice Chairman, EC (Observer) and the Secretary General. The purpose of meeting was to request CPLC to provide data of recovered vehicles to IAP. Subsequent to the be collected, compiled and made available at IAP. A format was devised to gather information from members on quarterly basis. The data for the years 2012 and were collected and posted on IAP's website. meeting CPLC provided the data for the period from 1st January to n The Accident and Executive 31st August The data was shared with member companies. Committees reviewed and discussed the work done by the IAP on Act only InsuranceNo n The Committee reviewed Sitting from Left to Right: Fault Model and to take the and finalized the statistics of Livestock and Crop insurance business for the year on the basis of returns from member companies. The figures were posted on IAP website. Mr. Naim Anwar (EC's Observer) Mr. Altaf Ahmed Siddiqi (Chairman), Mr. Hasan Mustafa (ViceChairman) & Mr. Azfar Arshad Standing from Left to Right: Mr. M. Numan Shaikh (Suptt. Accident & Life), Syed Ovais Bin Alam, Mr. N.A. Usmani (Secretary General), Mr. Imran Ahmed & Mr. Mahmood Ahmed process forward. In this regard a meeting was held with the Commissioner Insurance SECP wherein, it was agreed that unless the existing law was suitably changed and made more potent there would not be much progress on the issue. A proposal in this n To update the member companies on the important periodical regard has been sent to the Commissioner with a request to review reports generated by the IAP online claims management system, graphical presentations of the following (top5) reports for the period it and offer comments, in order that the IAP and SECP can mutually decide the next course of action. from 1st January to 31st December and 1st January to 31st March, 2014 were forwarded to member companies for information: n The Committee after various deliberations finalized draft of Make Wise Report Make & Sub Make Wise Report City Wise Report ACCIDENT COMMITTEE Workmen's Compensation Rules, which was circulated to IAP members and also placed on IAP's website. n Summary of snatched/stolen vehicles fitted with tracking devices for the year were finalized and provided to member companies for information. n The Committee felt that since IAP member companies are underwriting Health Insurance business, also that the State Bank of Pakistan is planning to launch Health Insurance Scheme on the pattern of Crop and Livestock insurance loan schemes therefore 13

15 SUMMARY OF THE ACTIVITIES OF PROPERTY COMMITTEE DURING THE YEAR 2014 n The Committee reviewed quarterly Fire statistics highlighting premiums and loss figures of different risk segments. Data for the year was compiled and circulated amongst members for information and uploaded on IAP website for exclusive use of members. n The Committee reviewed RSD, RFD, Standard Explosion and Malicious Damage clauses and advised some changes in the Sitting from Left to Right: Fire policy. Later the IAP received Mr. Mohammad Safdar, Capt. Zubair Hussain Qureshi (Chairman), suggestions from one of member Mr. Kamran Mazhar (ViceChairman) & Mrs. Shaheen Hafeez Sumar companies in respect of Standing from Left to Right: amendments advised. Since the Mr. Faisal Khan, Mr. Mumtaz Ali (Risk Surveyor), suggestions merit review, the Mr. N.A. Usmani (Secretary General), matter was again referred to the Mr. Mansoor Abbas Abbasi & Mr. Jawed Kasmani Committee by the EC and members were advised to hold printing and implementation of amended wording. The Committee deliberated upon the suggestions again at length and resolved that the existing version of Fire policy (Reworded and adopted during April 2011) was appropriate and required no more changes. Accordingly a circular CPR 1, dated March 13, 2014 was issued in this regard. n In view that clauses forming part of the fire policy were quite lengthy due to repetitions, therefore Property Committee decided that these may be shortened and made purposeful. The Committee commenced the drafting of precise version of RSD clause which has been finalized and will be sent to members shortly. PROPERTY COMMITTEE n To facilitate member companies regarding Regulator's requirement that insurance products information in Urdu be displayed at Companies' website, the Property Committee drafted a note for members' information. n During the period (July June 2014) 65 risk inspections were carried out for risks located at Sindh and Balochistan provinces: n Karachi Cotton Association (KCA) had approached IAP to help them in designing a Hydrant system to be laid at their godowns located at Landhi Karachi. The Committee on the advice of the EC decided to facilitate KCA in this regard. Accordingly IAP Risk Surveyor visited the site and prepared a design proposal after approval of the Property Committee and endorsed by the Executive Committee was sent to KCA. n The Committee felt that Members must aware of codes and standards applicable to buildings being constructed within Pakistan so that insured could be advised on specific aspects if necessary. Accordingly soft copy of the 'Building Codes of Pakistan' was sent to Members for their information. n The Committee decided to obtain latest policy wording of different covers for example; Terrorism cover under Terrorism T3, LMA3030, LPO437, LMA3092, Political Violence and Liability Insurance and made available at IAP website. 14

16 SUMMARY OF THE ACTIVITIES OF MARINE COMMITTEE DURING THE YEAR 2014 n Recognizing the importance of data for meaningful analysis of risks, commodities, perils and overall portfolio management, the Committee engaged in the following areas of statistical work: The Committee reviewed Inland Transit Losses statistics for the years 2012 and following which guidelines (duly authorized by the Executive Committee) for inland transit, were issued for member's information. Marine statistics were compiled on the basis of figures provided in the Members' Annual Reports for the year and were circulated amongst Nonlife member companies and also uploaded on IAP's Website. The Committee decided to analyze the reasons and hazards associated with commodities most commonly covered under Import and Export which have a negative impact on the portfolio. A format for collection of data from member companies has been developed and circulated to members. Subsequent to the terrorism attack at Karachi Airport on June 08, 2014 the Committee decided to collect data on the estimated loss amounts in order to ascertain the total insured exposure of the market. Data collection is in progress. n In view of rising trend of commodity losses at Wahgah border storage facility the Committee arranged a study visit to Wahgah border to observe condition of the cargo physically. The Committee witnessed conditions, arrangements and pace of dispatch of the cargo and met with officials of, both, Pakistan Customs authorities and those of National Logistics Cell (NLC ) the Custodians and discussed possibilities of minimizing cargo losses. The Committee made a detailed presentation to the Executive Committee highlighting its findings and recommendations for the insurance industry. MARINE COMMITTEE Sitting from Left to Right: Syed Matin Ahmed, Ms. Amna Sarfaraz Khan (Chairperson), Mr. Mohammad Sohail Nazir (ViceChairman) & Mr. Brendan Thomas D'Lima Standing from Left to Right: Mr. Muhammad Fayyaz Vakani, Mr. N.A. Usmani (Secretary General), Mr. Muhammad Naveed Fayyaz, Mr. Kamran Safi Rizvi & Mr. Mumtaz Ali (Risk Surveyor) Findings Imports via Wagah border are all in bags &/or in bulk noncontainerized. There is no agreement for use of containers between two countries probably due to security reasons. As such containers are not allowed at the moment. However special permission can be sought from relevant authorities to import cargo in container. Cargo is stored in Open. No proper sheds are available. Stored cargo not covered with tarpaulin. Even if covered, there is no pavement/ platform to protect cargo from ingress of water in case of Rain/flooding. Delay in collecting the cargo by consignees. NLC Charges for demurrage are insignificant and consignees take undue advantage by using NLC Yard as storage yard. Recommendations Imports should all be containerized. NLC has an approved Plan on papers for construction of sheds, roads, paved areas for storage of cargo and expected date of completion is Till the time sheds are built, temporary arrangements be made to protect cargo from rain water damage. Legislation be made to discourage using border as warehouse by importers. Insured must be persuaded to import cargo by trains. The Executive Committee while appreciating the efforts made by the Marine Committee for collecting and highlighting the facts particularly the causes of loss advised to proceed as follows: 15

17 Workout losses incurred (or at least insured losses) in trade between India and Pakistan via Wagah Border for the last five years and incorporate in the Report. Once the said figures are compiled letters be addressed to Karachi and Lahore Chambers of Commerce and industry apprising them about the losses and cause of losses and IAP recommendations. Thereafter presentations be also made to these chambers. Convert recommendations into warranties/conditions for advising to members. Authorities attention be drawn to the current situation at Wagah Terminal through advertisements in news papers by the IAP / insurance companies that if conditions at Wagah Border are not improved it would become difficult for the insurance companies to insure the cargo. Circulate the report with presentation to all IAP member companies for information. Presently the Committee is working on the warranties to be attached with Marine policies to mitigate such losses which in fact will result as outcome of the visit. Underwriters and cannot be amended as per our local requirement; the Marine Committee developed a separate clause which could be attached to the Import and/or Export policies in order to incorporate the above exclusion which will only be applicable to the inland transit within Pakistan. After the approval of the Executive Committee the clause was circulated to members for comments. Since no comments were received from any member company the Committee therefore advised to adopt the clause. n To facilitate Member companies regarding Regulator's requirement that insurance products information in Urdu be displayed at Companies' website, the Marine Committee developed such information and circulated to members as specimen. n The Committee decided to purchase a book 'Institute Cargo Clauses 77th Edition' for guidance of members. Accordingly Witherby Publishing Group, UK was contacted and subject book was purchased for IAP library/members' use. To observe cargo storage conditions/arrangements, clearance procedures and losses etc on both sides of border and prepare a joint paper for exchange of information, it has been decided by the Committee to visit the Indian side of border as well which would benefit the insurance industries of both the countries. n The Marine Committee had introduced earlier a clause in Road / Rail Cargo Clauses, which excludes losses arising from theft and/or criminal misappropriation and/or criminal breach of trust by carriers and/or their sub agents/subcontractors/drivers/ employees whilst the goods are in their care, control and custody during inland transit. The Committee felt that import and export policies which were issued under ICC Clauses wording were also exposed to similar kind of risks when the goods are moving inside Pakistan on their way from and to insured premises to Port and/or Airport as mentioned below; Import; from Seaport/Airport to consignee's premises in Pakistan. Export; from insured's premises to Sea port/airport in Pakistan. In view that since ICC clauses is issued by Institute of London 16

18 SUMMARY OF THE ACTIVITIES OF LIFE COMMITTEE DURING THE YEAR 2014 In January 2014, FBR's attention was drawn to the following tax issues were being faced by the life insurance companies and were adversely affecting the interest of policyholders and the growth of life insurance sector. n Life Insurance sector being specialized industry is taxed under special tax provision. The general provisions of law are not applicable over life insurance business. Section 99 of the Income Tax Ordinance, 1 directs the taxation of this sector under Fourth Schedule to the Income Tax Ordinance, 1 which has been legislated for this purpose. Since 1972 assessment was done under the above mentioned schedule but recently the Income Tax Department has misinterpreted legal statutes contained in Fourth Schedule in their favor and has disallowed the Policyholders Reserves as deduction from income, where as such reserves have allowed as deduction under Income Tax Law (i.e. exempt from tax under rule 3 read with rule 2 of the Fourth Schedule to the Income Tax Ordinance, 1.) to pay off the final claims/liabilities of policyholders on the maturity of policy or in event of death of the policyholder. These reserves have been added back to the taxable income and charged to tax at corporate tax rate of 35%. n Income Tax Department has now considered the maturity proceeds as "Profit on Debt" and applied the provisions of law legislated for application of withholding tax on debt instruments, for amount in excess of the premium paid. Life insurance contracts does not fall under the definition of debt instrument and hence section 151(1)(d) is not applicable on maturity proceeds. All the insurance companies have been considered as assesses in default and said withholding tax along with default surcharge have been recovered from some of the insurance companies. FBR was also informed that appeals filed in the court of law by LIFE COMMITTEE Sitting from Left to Right: Mr. Hashim Sadiq Ali (Chairman), Mr. Imran Ali Dodani, Mr. Manzoor Ahmed, Mr. Jalal Meghani (ViceChairman) & Mr. Muhammad Rashid Standing from Left to Right: Mr. Mohammed Ali, Mr. N.A. Usmani (Secretary General) & Mr. M. Numan Shaikh (Suptt. Accident & Life), State Life Insurance Corporation have been upheld in favor of insurance companies but the Income Tax Department is still taking alleged actions and such actions of the tax department would suppress the growth of the Life Insurance business, which has a penetration of less than 0.4% of GDP, the lowest in the region. Subsequently a meeting with Chief Income Tax Policy FBR, Islamabad was held on 1st April 2014 which was attended by the IAP and life insurance companies representatives. n In the Sindh Budget exemption of sales tax on life and health insurance business had been removed. Only individual life premiums up to Rs. 500,000/ per annum had been exempted. In view that it would have a serious impact on life insurance penetration and the insurance business specially group life, high net worth customers and single premium policies. IAP in June, 2014 addressed a letter to Advisor Tax Policy, Sindh Revenue Board, and his attention was drawn to the following facts: In Pakistan, insurance has always been a neglected area. There has been very little emphasis on the importance of Life insurance from the Government's perspective. However, in the last few years Government has been taking solid steps in order to boost the growth of this neglected sector. A tax rebate on life insurance was introduced in 2011 and further improved in Accepting the nature of life insurance as a medium of savings, it seems wrong in principle to subject it to General Sales Tax. Savings need to be encouraged not discouraged, if Pakistan is to attain the goal of selfreliance. Life Insurance premium remains exempted at the federal level and also exempted by SRB through notification S.R.O. Leg.(1)/2011 dated 1st July It is important to note that a small part of life insurance premium is used to provide protection against the risk of death or disability 17

19 and the bulk constitutes savings of the policyholders. Levying GST on life insurance premiums would therefore be akin to levying sales tax on new bank deposits or new investments in mutual funds which is obviously not right. The net result would be certain no further investment in life insurance as individual would want to make savings where a large proportion is immediately taken away by the state. Life Committee to finalize its comments. The Comments were submitted to SECP on 7th March Thereafter a meeting was held with Chairman, SRB on 30th June During the meeting the position was fully explained to the Chairman SRB. The SRB vide their letter No. SRB3 4/TP/72//34843 dated 2nd July, 2014 advised that the exemption from Sindh sales tax on life insurance (tariff heading ) and health insurance (tariff heading ), as were allowed under notifications No. SRB.Leg(1)/2011 dated and No. SRB34/7/ dated 1806 has been withdrawn vide notification No. SRB34/11/2014 dated , effective from However, life insurance, other than group life insurance of individuals for insurance policy coverage of upto Rs. 500,000/ shall remain exempt from the levy of Sindh sales tax i.e. exemption was further limited by replacing the word 'Premium' with "Coverage" However SRB had informed in the above said meeting that any suggestions or recommendations for facilitation in the procedure for collection of Sindh sales tax on life insurance and health insurance would be welcomed. Accordingly a representation based on Balance Sheet figures was submitted to Chairman SRB explaining position of inflows (income) and outflows (expenses) in each area; Individual Life, Group Life Business, and Group Health Business. It was followed by more discussions with SRB, exemption on life and health insurance has been reinstated for the services rendered during the period from 1st July 2014 to 30th June n The Draft Bancassurance Regulations were deliberated by the Committee at its meetings. Clause wise discussions were held at length in the light of comments received from members on the initial draft of Bancassurance Regulatory Framework.The Life Committee's comments were submitted to SECP. n The SECP vide Circular No. 3 of 2014 dated 31st January 2014 published draft Unit Linked Products and Fund Rules, 2014 to elicit public comments. Being an important matter as regard to life insurance companies, the draft was deliberated at length by the 18

20 MARKET OVERVIEW OF NON LIFE INSURANCE INDUSTRY IN PAKISTAN

21 NON LIFE INSURANCE PRIVATE SECTOR Balance Sheet as at 31st December Equity Issued, Subscribed & Paid up Capital 16, , , , Reserves and Retained Earnings 46, , , , , , , , Surplus on revaluation of fixed assets 1, Adv.Agst issue of right shares Underwriting Provisions Provisions for Outstanding Claims (including IBNR) 24, , , , Provision for Unearned Premium Net 21, , , , Commission Income Unearned , , Additional Provision for Unexpired Risk 1, , Total 47, , , , Deferred Liabilities Liability against Finance Lease 6.00 Creditors and Accruals 13, , , , Surplus of Fix Assets/Short Term Finance Other Liabilties 2, , , , Total Equity and Liabilities 129, , , , Cash and Bank Deposits 10, , , , Loans Secured Considered Good Investment 62, , , , Investment Properties , , Deferred Tax Reinsurance Recoveries Against Outstanding Claims 16, , , , Deferred Commission Expense 2, , , , Other Assets 29, , , , Capital Work Fixed Assets 6, , , , Leased Assets Negative Goodwill Total Assets 129, , , , BALANCE SHEET RATIO Net Working Capital (Rs.) 15, , , , Current Ratio Total Assets/Net Worth Break up Value Profit and Loss Account for the year ended 31st December Revenue Account Net Premium Revenue 25, , , , Premium Deficiency reversal/(expense) (3.10) (6.10) (5.05) Less: Net Claims (14,065.81) (13,385.33) (13,926.49) (13,863.26) Less: Expenses (6,947.20) (6,397.19) (5,492.81) (5,149.62) Less: Net Commission (1,666.66) (1,311.14) (1,515.24) (1,524.87) Underwriting Balance 3, , , , Investment Income 7, , , , Rental Income Other Income 1, General and administration expenses (2,699.22) (2,695.03) (3,792.25) (2,353.03) Profit Before Tax 8, , , , Taxation 1, Profit After Tax 7, , , , APPROPRIATIONS Balance unappropriated profit at end of previous year 20, , , , Profit after tax for the year 8, , , , Dividend 2, , , , Reserve for Bonus share 2, General Reserve 1, (739.20) Other (15.54) (68.16) (1.98) (20.64) Sub Total 6, , , , Balance Unappropriated profit at end of year 22, , , , UNDERWRITING RATIOS Claims incurred to net premium Net Profit to net premium Management expenses to net premium Commission to net premium Earning per share of Rs.10/= each Cash Dividend 2, , , , Stock Dividend 2, Balance Sheet Growth Equity Growth Claim Incurred Net Premium Underwritten 20 Investments Cash and Bank Balances Net Profit after tax Note: The amount on yaxis represent Dividend and other appropriations

22 MARKET OVERVIEW OF LIFE INSURANCE INDUSTRY IN PAKISTAN

23 LIFE INSURANCE PRIVATE SECTOR Balance Sheet as at 31st December Statutory Fund Share holders Fund Individual Individual Unit Life Linked Fund Conventional Group Life Group Pension Accident & Health Business Aggregate Aggregate 2012 Aggregate 2011 Aggregate 2010 Share Capital and Reserves Authorised Share Capital 4, , , , , Issued, subscribed and paid up Share Capital 4, , , , , Reserves & Retained Earnings 2, , , , Net Shareholders' Equity 6, , , , , Balance of statutory fund 82, , , , , , Deferred Liabilities Creditors and Accruals , , , , , , Other Liability TOTAL LIABILITIES , , , , , , TOTAL EQUITY & LIABILITIES 6, , , , , , , Cash and Bank Deposits , , , , , Loans Investments (Net) 4, , , , , , , Investment in properties Deferred Taxtation Other Assets , , , , Tangible assets , , Intangible assets TOTAL ASSETS 6, , , , , , , ASSETS AT MARKET VALUE BALANCE SHEET RATIOS Net Working Capital Current Ratio Total Assets / Net Worth Break up Value 22

24 LIFE INSURANCE PRIVATE SECTOR Revenue Account for the year ended 31st December Statutory Fund Individual Unit Linked Fund Individual Life Conventional Group Life Group Pension Accident & Health Business Aggregate Aggregate 2012 Aggregate 2011 Aggregate 2010 Net Premium Income 33, , , , , , , , Net Investment Income 9, , , , , Other Income Total Net Income 43, , ,.93 1, , , , , Net Claims 7, , , , , , , Net Management Expenses 9, , , , , , Total claims and expenditures 16, , , , , , , , Excess of Income over Claims and Expenditure 26, , , , , , Add : Policyholder Liabilities at Beginning of Year 57, , , , , , Less : Policyholder Liabilities at End of the Period 81, , , , , , Surplus/(Deficit) 2, , , , , Movement in policy holder liabilities 23, (14.07) 24, , , , Transfers to or from Shareholders' Fund (2,433.14) (150.88) (0.21) (62.34) (2,646.56) (1,875.17) (1,510.75) (1,017.73) Capital contributed from share holders fund (194.77) Balance of Statutory Fund at Beginning of Year 58, , , , , , Balance of Statutory Fund at End of the Period 82, , , , , , Represented by: Capital contributed by Shareholders' fund , , , Policyholders' liabilities 81, , , , , , Retained earnings on other than participating business (279.83) (18.62) (144.24) Balance of Statutory Fund 82, , , , , , REVENUE ACCOUNT RATIOS Claims incurred to net premium Net profit to net premium Management expenses to net premium 23

25 LIFE INSURANCE PRIVATE SECTOR Profit and Loss Account for the year ended 31st December Aggregate Aggregate 2012 Aggregate 2011 Aggregate 2010 Net Investment income not attributable to statutory funds Gain / (Loss) on sale of investments Impairment of Shares Total Investment Income Other revenue Total Investment Income and other revenues Less Expenses not attributable to statutory funds (158.71) (120.03) (46.47) Profit / (Loss) before appropiation of surplus to shareholders fund Add: Surplus appropiated to Shareholders fund from ledger A/C D 2, , , Profit/(Loss) before tax 2, , , Extra Ordinary Items Deferred Tax (1.87) 0.00 Profit/(Loss) before tax and after extraordinay items 2, , Taxation (960.51) (806.34) (449.21) (303.98) Profit/(Loss) after tax 2, , , APPROPRIATIONS Balance at commencement of the year 2, , , , Profit after tax for the year 2, , , Transfer to General Reserve (268.00) Transfer to Bonus Share ) (.00) Proposed Dividend (996.38) (740.64) (569.57) Right Share issued Capital (contributed)/during the year 0.00 (28.16) (14.25) 0.00 Capital withdran during the year (30.91) Balance upappropriated profit at the end of the year 3, , , , PROFIT AND LOSS ACCOUNT RATIOS Earning per share Cash Dividend Bonus Share Balance Sheet Growth Equity Growth Claim Incurred Net Premium Underwritten Investments Cash and Bank Balances Net Profit after tax Dividend and other appropriations 24 Note: The amount on yaxis represent