Pakistan

General
Insurance
Market
History
Saifuddin N. Zoomkawala 77 foreign insurance companies were dominating the Pakistan market post partition when
Managing Director the strength of local insurers was only Seven. In 1952 Government established Pakistan
EFU General Insurance Ltd. Insurance Corporation to promote the local insurance industry and number of local
insurance companies increased to 60 while number of foreign companies reduced to Seven.

In 1976 National Insurance Corporation (NIC) was formed, with the purpose of
undertaking General Insurance business relating to any public property.

Present Situation
The Pakistani insurance market has undergone major structural changes in last few years
through mergers of companies to meet the increased statutory requirement of minimum
paid up capital as per Insurance Ordinance 2000. Some companies who were unable to raise
this capital have been asked to close down their operations.

The Security and Exchange Commission of Pakistan (SECP), Insurance Division, is trying
to improve the image of Pakistan Insurance Industry by issuing directives on financial
security and transparency, code of good governance and sound market practice.

Key Market Players

The general insurance market comprises two segments Private Sector and Public Sector.

Private Sector is composed of 42 Local companies (29 are active) and 1 foreign company.
National Insurance Company Limited (NICL) is the only direct insurer for public sector.

Allianz-EFU Health insurance company was set up as the first Specialized Health Insurance
Company in Pakistan.

Insurance Sector at Karachi Stock Exchanged:

Particular Number % of Total
KSE Listed Companies 654 100
Listed Insurance Companies 29 4.4
Paid Up Capital Rs. Billion % of Total
Total Listed on KSE 637 100

Listed Insurance Companies 9 1.41

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Private Sector:
(amount in billions of Rupees)

Year Gross Net earned premium Net claims incured Underwriting profit
Premium

2007 31.04 18.99 61% 13.53 71% 0.41 2%

2006 27.99 17.77 63% 11.06 62% 2.24 13%

2005 22.75 13.31 58% 7.96 60% 1.95 15%

Note: Stats represents 29 companies for 2006 & 2005. 2007 represent 28 companies excluding AIG.

Although insurance premiums have increase by 11% in 2007 compared to 2006, it reflects only 0.5% of Pakistan's GDP. This shows very
low penetration of insurance Market as compared to India and Sri Lanka. It is anticipated that insurance penetration in future will rise at
0.06% per year and it will touch 1.0% in 2010.

The Market Share of top four companies (including NICL) is 74%, while remaining companies share the balance of 26%. This shows that
non-life insurance Sector is highly fragmented.

Premium written
Rank Insurance company Market share
(PKR Billion)

1 Adamjee Insurance 9.38 27%

2 EFU General Insurance 8.96 25%

3 National Insurance Co Ltd 4.25 12%

4 New Jubilee Insurance 3.43 10%

Sub Total 26.02 74%

Others 9.27 26%

General total 35.29 100%

MARKET PRODUCTS AND VOLUMES

Property Insurance (Fire & Engineering)
Gross premium for this line in 2007 was Rs 10.42 Billion (2006: Rs. 8.84 Billion)

Marine andAviation Insurance (Marine Cargo, Marine Hull Aviation)

Gross premium for this line in 2007 was Rs 4.54 Billion (2006: Rs. 4.24 Billion)

Motor Insurance
Gross premium for this line 2007 was Rs 11.39 Billion (2006: Rs. 11.19 Billion)

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Miscellaneous Insurance: Other insurance covers not Human Resources
classified above Gross premium for this line in 2007 was Rs 4.44 The industry should develop human resources for greater
utilization of IT resources and to improve competitive edge and
Billion (2006: Rs. 3.48 Billion)
services.
Allianz EFU - first specialized insurance company of Pakistan.
Gross premium in 2007 was Rs 800 million (2006: Rs 600 million)
Bogus Insurance companies
The general insurance industry is facing prevalence of bogus
insurance companies issuing spurious Motor vehicle Third party
NICL - was formed in 1976 to undertake General Insurance insurance Polices for motor vehicle for Registration Purposes.
business relating to any public property. In 2007 gross premium
written was Rs. 4.25 billion.
Takaful Insurance
A perception that conventional insurance is not allowed in Islam
Reinsurance: Pakistan Reinsurance Company Limited
was another cause of low penetration. In order to address this
(PRCL) was formed by the Government of Pakistan to provide
Government had promulgated Takaful Rules in 2005, allowing
reinsurance capacity to the local insurance industry.
dedicated Takaful companies to start writing business. Three
Takaful operators have started general Takaful operations. Window
A number of foreign reinsurers from Europe, Middle East and Asia
operations have also been principally allowed, although the
are also supporting this market.
industry is waiting for this amendment to the rules, which should
boost the industry as a whole.
Distribution Channels: General insurance is sold
primarily through agents, although brokers have now been
recognized under Insurance Ordinance 2000. Both are regulated by
Insurance of Public Properties
The insurance of public properties should be opened to the private
SECP.
sector.
Insurance Surveyors and loss Adjusters - An
independent body licensed by the government to give professional
CHALLENGES
opinion regarding the cause and extent of loss.
Insurance in RuralAreas - so far a failure in penetration
InsuranceAssociation of Pakistan (IAP) - InsuranceAssociation
of Pakistan (IAP) is a member body of a federation and practically
Agriculture Insurance - a primary threat that is not insured
all-private insurance companies are its members. The main
functions of IAP are to promote cause of insurance business in
Bancassurance - Another emerging distribution channel
which insurance Companies are aggressively following and the
Pakistan.
business emanating from this Channel is likely to increase
substantially in the next 3 to 5 years.
ISSUES
Riot Losses 27 December E-Commerce - A new technology for selling insurance. In
Pakistan a couple of Insurers are able to provide quotes through
Riots of 27 December after assassination of Mohtarma Benazir
their websites.
Bhutto caused huge deficits for the Insurance Industry. In future
such riot losses of this nature will not be payable.
The future
The future looks very positive for the non-life insurance market in
Insurance Database Pakistan. Although there are many challenges ahead, the low
Development of Database at Insurance Association of Pakistan
penetration in the non-life sector, and strong economic growth are
level may promote good underwriting practices and avoid
two factors likely to lead to significant premium growth in the years
frauds/malpractices.
ahead.

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