SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN

Insurance Division

Policy, Regulation and Development Department

Circular No. 02 of 2023

Islamabad, March 3, 2023

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SUBJECT: AMENDMENTS IN THE CIRCULAR 24/2010 – REINSURANCE/ RETAKAFUL TREATY ARRANGEMENTS - 2011

Attention is invited towards para 3 of Circular 24/2010 “Reinsurance/ Retakaful Treaty Arrangements - 2011” which states as follows:

"Furthermore, at least 80% of the total reinsurance/ retakaful treaty arrangement for each class of insurance/ takaful business must be placed with reinsurance/ retakaful operators having “A” or above rating by “Standard & Poor’s” or equivalent rating by any other reputed international rating agency and the balance (20%) may be placed with reinsurers/ retakaful operators having at least “BBB” rating by “Standard & Poor’s” or equivalent rating by any other reputed international rating agency. Any part of the reinsurance or retakaful treaty arrangement placed with reinsurers/ retakaful operators having rating below “BBB” by “Standard & Poor’s” or an equivalent rating by any other reputed international agency would not be acceptable to the Commission".

2. Considering the challenges being faced by the insurers and takaful operators in non-life insurance industry on renewing their treaty arrangements with foreign reinsurers/ retakaful operators for the year 2023, the aforesaid requirements of para 3 of Circular 24 of 2010 have been relaxed as follows:

• At least 60% of the total reinsurance/ retakaful treaty arrangement for each class of insurance/ takaful business must be placed with foreign reinsurance/ retakaful operators having at least “A” or above rating by “Standard & Poor’s” or an equivalent rating by any other reputed international agency;

• Maximum upto 40% of the total reinsurance/ retakaful treaty arrangement for each class of insurance/ takaful business must be placed with foreign reinsurance/ retakaful operators having at least “BBB” rating by “Standard & Poor’s” or an equivalent rating by any other reputed international agency;

• Maximum upto 10% of the total reinsurance treaty arrangement for each class of insurance business and maximum upto 20% of the total retakaful treaty arrangement in case of takaful business may be placed with the foreign reinsurance or retakaful operators, respectively, having at least “B” rating by S&P or an equivalent rating by any other reputed agency; and

• Any part of the reinsurance/ retakaful treaty arrangement for each class of insurance/ takaful business placed with foreign reinsurance/ retakaful operators having below “B” rating by “Standard & Poor’s” or an equivalent rating by any other reputed international agency would not be acceptable to the Commission.

3. The said relaxation is only applicable to non-life insurers and takaful operators for their treaty arrangements for the year 2023 until any further notice in this regard. For the years 2024 onwards, the requirement of para 3 Circular 24 of 2010 will to prevail.

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Mujtaba Ahmad Lodhi
Commissioner – Insurance (PRDD)

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Distribution:

• Chief Executive Officers of all non-life Insurance Companies and Takaful Operators
• Chairman (Insurance Association of Pakistan)
• President (Institute of Chartered Accountants of Pakistan)
• President (Institute of Cost & Management Accountants of Pakistan)

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Head Office: NIC Building, 63 – Jinnah Avenue, Blue Area – Islamabad Phone: (051) 9195000-2 | Website: www.secp.gov.pk

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SECURITIES AND EXCHANGE COMMISSION OF PAKISTAN Insurance Division, NIC Building, 63 Jinnah Avenue, Islamabad.
PABX: +92-51-9195000-2, Fax: +92-51-9100496, Web: www.secp.gov.pk