Regulatory Alerts2023-04-18
Added · Updated
Circular No. 05 of 2023 – Applicability of Section 166 of Insurance Ordinance to CAR/EAR Policies
Non-life insurers must review Contractors’ All Risk and Erection All Risk policies on a case-by-case basis to ensure coverage is limited to private contractors’ property, machinery, or liabilities. Policies covering only private contractor risks are exempt from Section 166(3) of the Insurance Ordinance, 2000, whereas those covering public property risks must be placed exclusively with M/s National Insurance Company Limited. These requirements apply prospectively to new policies issued after April 10, 2023, and do not affect existing policies or their renewals.
SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN INSURANCE DIVISION POLICY, REGULATION AND DEVELOPMENT DEPARTMENT
No. ID/PRDD/CIRCULARS/2023 April 10, 2023
Circular No. 05 of 2023
Subject: Applicability of Section 166 of the Insurance Ordinance, 2000 to Contractors’ All Risk/Erection All Risk Polices Issued to Private Contractors for Construction/Renovation/Maintenance of Public Properties
This Circular is in supersession of Circular No. 1 of 2016 dated January 4, 2016 and Circular No.1 of 2016 dated March 4, 2016 regarding the applicability of Section 166 of the Insurance Ordinance, 2000 (the “Ordinance”) to Contractors’ All Risk/Erection All Risk Polices issued to private contractors by non-life insurers.
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In respect of application of Section 166 of the Ordinance to the subject policies issued to private contractor, an insurer shall prior to entering into a contract of insurance review on a case to case basis that the coverage it offers, insures only the private contractors’ property, their machinery or any claim arising out of the contractors’ risk or liability or otherwise.
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Where the insurance policy covers the property, machinery or any risk or liability of the private contractor, the same would not fall within the purview of the Section 166(3) of the Insurance Ordinance, 2000. However, where the insurance policy covers risk relating to a public property or any risk or liability appertaining to the public property (not the private contractors’ property), it shall only be placed with M/s National Insurance Company Limited.
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The requirement stipulated in para 2 of this Circular shall be applicable prospectively on new CAR/EAR policies to be issued by insurance companies and M/s National Insurance Company Limited, and it shall not be required for policies already in force and the renewals thereof.
(Aamir Khan) Commissioner (Insurance-PRDD)
Distribution: i. Chief Executive of all non-life Insurance Companies (including NICL) ii. Chief Executive all General Takaful Operators iii. Chairman Insurance Association of Pakistan (IAP) iv. President (Institute of Chartered Accountant of Pakistan) v. President (Pakistan Society of Actuaries) vi. President (Institute of Cost and Management Accountants of Pakistan)
NIC Building, 63- Jinnah Avenue, Blue Area, Islamabad. PABX: 9207091-4, Web: www.secp.gov.pk