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For business information, annual reports, laws, ordinances, regulations and articles. |
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CHAPTER XV
INSURANCE BUSINESS
1. General.
The Exchange regulations governing insurance business entered into
in Pakistan are set out in this chapter. Branches and agencies in Pakistan of
insurance companies whose head offices are situated abroad are, for Exchange
purposes, subject to the same regulations as insurance companies registered
in Pakistan.
2. Issue of Life Policies to Pakistanis.
Insurance policies on the lives of Pakistanis resident in Pakistan
can be issued only in Rupees.
3. Issue of Policies to Foreigners residing in Pakistan.
Policies on the lives of foreign nationals resident in Pakistan may
be issued in Rupees. State Bank will permit conversion of such Rupee policies
into foreign currency policies and consequential transfer of actuarial reserves
as also remittance of maturity proceeds, as the case may be, provided the premia
in Rupees is paid by them out of their genuine savings which are otherwise remittable.
Similar facility is also available to diplomats accredited to Pakistan and expatriate
employees of international organizations provided premia in Rupees is paid by
them out of their convertible Rupee accounts.
4. Issue of Foreign Currency Policies.
Foreign currency policies may be issued on the lives of foreign nationals
where premia is paid by them in foreign exchange or out of remittable Rupee
funds of the policy holders as laid down in paragraph 17 ibid. Foreign currency
policies can also be issued on the lives of Pakistan nationals domiciled abroad
provided premium is paid in foreign exchange only.
5. Premia on Rupee Policies held by Pakistanis Resident abroad.
Premia on Rupee life policies held by Pakistanis resident abroad must
be received either by remittance from abroad or out of Rupees held in the non-resident
account of the policy holder.
6. Assignment.
Rupee Policies cannot be assigned by a resident in Pakistan to a non-resident
except with the prior approval of the State Bank. Foreign currency policies
held by foreign nationals may, however, be assigned to non-residents without
State Bank's approval.
7. Payment of Claims – Rupee Policies.
The maturity proceeds or surrender value of Rupee policies will be
paid in Rupees only. In the case of foreign nationals, the remittance of maturity
proceeds/surrender value of Rupee policies held by them, can be allowed only
with the prior approval of the State Bank as indicated in preceding paragraph
3. Application for this purpose should be made in the prescribed form (Appendix
V-51).
8. Payment of Claims – Foreign Currency Policies.
The maturity proceeds or surrender value of foreign currency policies
held by foreign nationals may be paid in rupees or in the currency of the policy.
Payment in foreign currency will be made with the prior approval of the State
Bank.
9. Export of Policies.
Life and Endowment policies fall within the definition of securities
and cannot be taken or sent out of Pakistan without the prior approval of the
State Bank. Application for export of life policies should be made to the State
Bank giving full description of the policy and reasons for its export.
10. Remittance of Premia on Foreign Currency Policies of Pakistanis.
Pakistanis, who had taken foreign currency policies while residing
abroad, are required to declare them to the State Bank on their return to Pakistan.
In this connection, reference is invited to the instructions contained in para
15 of Chapter XX. Normally in such cases, the policy holders will be required
to repatriate the surrender value of the policy to Pakistan. However, in cases
where the policy is to mature within one year or so, the State Bank will consider
allowing remittance of premia subject to the condition that the proceeds of
the policy on maturity will be received in Pakistan through banking channel.
Application for the purpose should be made in the prescribed form (Appendix
V-52).
11. Marine Policies – Exports.
Exports from Pakistan can be insured by the exporters only if the goods
are shipped on C.I.F. basis. In respect of shipment on F.O.B. or C & F basis
insurance will be arranged by the overseas buyers. Exporters can take out policies
only from companies operating in Pakistan, which can be expressed in Rupees
or in foreign currency.
12. Marine Policies – Imports.
i) Imports into Pakistan are required compulsorily to be insured in
Pakistan with companies operating in Pakistan. Imports can thus be made only
on C & F or F.O.B. basis. It is not permissible to issue marine policies
covering imports into the country in currencies other than Rupees.
ii) As an exception to the above general rule:
a) National Insurance Company Limited is authorised to issue foreign currency
policies against imports financed by P.I.C.I.C./I.D.B.P. and directly by the
loan-giving agencies.
b) Sub-authorisations issued under U.S. AID Programme on C.I.F. basis can,
at the option of the importers, be utilized for imports from U.S.A. on C.I.F.
basis by arranging insurance in the U.S.A.
13. Marine Policies – Shipment between two countries outside
Pakistan.
Shipments between two countries outside Pakistan financed by a person
or firm in Pakistan with the permission of the State Bank, can be insured in
Rupees or in foreign currency.
14. Marine Policies – Coastal Shipments.
Coastal shipments between places in Pakistan can be insured in Rupees
only.
15. Non-Marine Risks Excluding Life.
i) Insurance cover on non-marine risks (excluding life) inside
Pakistan can be issued in Rupees only. Nothing in this paragraph shall affect
the operation of the warehouse clause in marine insurance policies.
ii) Insurance cover on assets outside Pakistan owned by residents of Pakistan
can be issued in Rupees or in the currency of the country in which the assets
are situated.
iii) Insurance cover in respect of personal baggage and valuables in transit
of Pakistan nationals can be issued in Rupees only. In respect of foreign nationals,
such insurance covers can be written in Rupees or foreign currencies. However,
in cases where foreign currency policies are issued to foreign nationals, premia
thereon can be collected in foreign exchange only.
iv) House-holders policies can be issued in Rupees only.
v) The issue of personal accident policies is governed by the same conditions
as those applicable to life policies.
vi) Policies under the Workmen's Compensation Act and Merchant Shipping
Act can be issued in Rupees only.
16. Premia Collection – Rupee Policies.
Premia on policies issued in Rupees to non-residents can be collected
by remittance from the country in which the policy holder is resident or out
of Rupees held in his non-resident account. Insurers are not permitted to accept
payments in Rupees from resident sources.
17. Premia Collection – Foreign Currency Policies.
Premia on foreign currency policies issued by insurance companies in
Pakistan, in respect of foreign nationals resident in Pakistan, can be collected
out of remittable Rupee funds of the policy holder or through a remittance received
from abroad. In respect of foreign nationals residing abroad, the premia can
be collected only through a remittance from abroad. As regards Pakistan nationals
holding foreign currency policies, premia can be collected in foreign exchange
only as laid down in paragraph 4 ibid.
18. Method of Settlement of Claims (Non-Life).
Claims on Rupee policies can be paid in Rupees only even in cases where
the beneficiary is a non-resident.
19. Claims under Foreign Currency Policies covering Imports under
Aid/Loan.
Claims arising under Foreign Currency policies covering imports under
Aid/Loan can be paid by National Insurance Company Limited (NICL) without the
prior approval of the State Bank of Pakistan in foreign currency for the replacement
of goods damaged or lost in transit. Before making payment of claims in foreign
currency, the NICL will obtain from the concerned importers an undertaking to
the following effect:
i) The amount of the claims will be utilized only to the extent required for
replacement of the goods damaged/lost in transit and any amount un-utilised
will be repatriated to Pakistan through the medium of an Authorised Dealer in
foreign exchange.
ii) Documentary evidence regarding payment made to the overseas suppliers in
respect of goods purchased in replacement shall be submitted to the State Bank.
iii) The documents viz. Invoice relating to shipment duly endorsed by the
Authorised Dealer, Bill of Lading, Bill of Entry and Bank's certificate showing
repatriation of un-utilised amount, if any, shall be submitted to the State
Bank within 4 months from the date of payment to the overseas suppliers.
The National Insurance Company Limited will report the payment of the claims
in foreign currency to the State Bank through a monthly statement showing the
amount of claims, names and addresses of the importers, number and date and
value of the import licences/authorisation, if any, against which the goods
were originally shipped and names and addresses of the overseas exporters. The
statement, alongwith the copies of claim payment advices sent to the respective
importers and relative undertaking obtained from them, should be so submitted
as to reach the concerned area office of the Exchange Policy Department by the
7th of the following month.
20. Claims in respect of Marine Policies covering Exports.
i) Claims arising under the policies covering exports from Pakistan
are payable to the shippers in cases where the proceeds have not been realised
from the overseas importers. Where the payments have been received by the shippers,
the claim can be paid to the overseas importers.
ii) Remittance of these claims by Pakistani insurance companies to foreign
importers may be allowed by the Authorised Dealers on submission of applications
accompanied by the following documents:
a) Application on Form 'M' alongwith the declaration in the prescribed
form (Appendix V-53).
b) Claim Note.
c) Policy in original. Duplicate acceptable where original is retained
by the Customs authority of the importing country and/or lost and indemnity
in lieu of the original.
d) Invoice on CIF basis relating to the shipment.
e) Bill of Lading/Airway Bill/Postal Receipt relating to the shipment.
f) Survey Report/Short Landing Certificate/General Average Adjustment/Short
Contents Certificate/No Survey Loss Certificate. Survey is not necessary if
claim is not likely to exceed U.S. $100/-.
g) Foreign bank's certificate to the effect that the proceeds relating
to the shipment against which claim is made have already been remitted to Pakistan
(except in case of general average claim payable to adjusters).
iii) To facilitate prompt payment to overseas claimants, the State Bank will
consider requests from Pakistani insurance companies for settlement of such
claims by their overseas settling agents through a system of revolving letter
of credit. In cases where such permission is given, claims would be scrutinized
by the overseas settling agents on the basis of the documents indicated at serial
No. (b) to (g) in the preceding sub-paragraph and payments made through revolving
letter of credit. The claim documents both in respect of direct remittance and
remittance under letter of credit should be submitted to the State Bank alongwith
the relative Form ‘M’ while reporting the transaction in the monthly
Returns for post facto checking alongwith the declaration in the prescribed
form (Appendix V-53).
iv) Foreign insurance companies are required to settle claims in respect
of marine policies covering exports through their head offices on the basis
of all the above claim documents.
21. Claims under Foreign Currency Policies other than Marine.
Claims on foreign currency policies other than marine can be paid as
under:
i) Where the beneficiary is a non-resident, the claim can, with the permission
of the State Bank, be paid in the currency in which the policy is issued.
ii) Where the beneficiary is resident in Pakistan, payment of claim can
be made in Rupees only for which prior permission of the State Bank is not required.
In case, however, the resident beneficiary requires payment in the currency
of the policy, application for making such payment should be made to the State
Bank giving full reasons as to why he requires payment in foreign currency.
Application for remittance of claim under (i) and (ii) above, should be made
on Form 'M' accompanied by the prescribed declaration (Appendix V-53).
22. Reinsurance Business.
Exchange facilities for reinsurance will be given only to branches
or offices of insurance companies in Pakistan doing business on their own account.
Such facilities will not be given to agents of non-resident companies who book
business on account of the non-resident companies.
23. Reinsurance – Life.
Remittance of reinsurance premia both under treaty and facultative
cover arising from the life insurance policies is not permissible except in
the following cases:
a) Reinsurance premia on policies reinsured
before 29th December, 1970.
b) Reinsurance premia on policies issued and reinsured on or after 25th May,
1973 for sums over Rs. 3.5 lacs in respect of death risk only.
c) Re-insurance premia on policies issued in respect of accidental death risks
for any amount.
24. Remittance
under Reinsurance Business.
Permission may be given by the Authorised Dealers for remittances in
respect of reinsurance business effected with or accepted from non-resident
companies on the insurance companies submitting to them the following information
and documents. Remittances in respect of life re-insurance business will, in
addition, be subject to conditions laid down in the preceding paragraph 23:
i) Remittance of premia under Facultative Reinsurance:
a) Applications on Form 'M' accompanied by a declaration in the prescribed
form (Appendix V-54).
b) Evidence in the nature of cover note etc., in respect of reinsurance
effected.
c) Certificate from the Controller of Insurance to the effect that the
local market has been fully utilized before placing any part of the risk outside
the country facultatively.
ii) Settlement of Account under Treaty Reinsurance:
a) Application on Form 'M' accompanied by declaration in the prescribed
form (Appendix V-55).
b) A proforma statement of account showing net balance payable/receivable
signed by the manager or an authorised officer of the applicant company duly
confirmed by the beneficiary.
c) Proceeds Certificate in case any amount of claim has been received in
cash and the same is being accounted for through the statement of account.
These documents will be submitted to the State Bank with the monthly Returns.
25. Foreign Currency Accounts of Pakistani Insurance Companies.
Retention of foreign currency received by Pakistani insurance companies
is not permissible except with the special permission of the State Bank. Premia
collected by them in foreign currency must, therefore, be sold to an Authorised
Dealer. There is, however, no objection to the settlement of reinsurance accounts
through the non-resident reinsurers.
26. Transfer of surplus Funds of Marine and General Business by
Foreign Insurance Companies.
It is the practice with foreign insurance companies, operating in Pakistan,
to settle through their head offices all claims arising under the policies issued
by them and payable to non-residents. Similarly claims arising in Pakistan under
the policies issued by their head offices are settled by their branches in Pakistan.
To facilitate such settlements the local branches of overseas insurance companies
are allowed to transfer their surplus funds on quarterly, half-yearly or annual
basis. Companies wishing to transfer surplus funds should make an application
to the State Bank, through the Authorised Dealer maintaining their account,
on Form 'M' supported by (i) a no objection certificate from the Controller
of Insurance, (ii) a declaration and statement in the prescribed forms (Appendices
V-56 and V-57) signed by the manager or an authorised officer of the remitting
branch holding power of attorney, and (iii) other requisite documents.
