Pakistan

General
Insurance
Market
History
Saifuddin N. Zoomkawala
Managing Director
EFU General Insurance Ltd.

77 foreign insurance companies were dominating the Pakistan market post partition when
the strength of local insurers was only Seven. In 1952 Government established Pakistan
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:

Number

% of Total

KSE Listed Companies

654

100

Listed Insurance Companies

29

4.4

Rs. Billion

% of Total

637

100

1.41

Particular

Paid Up Capital
Total Listed on KSE
Listed Insurance Companies

22

Private Sector:
(amount in billions of Rupees)

Year

Gross
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%

Net earned premium

Net claims incured

Underwriting profit

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.

Rank

Insurance company

Premium written
(PKR Billion)

Market share

Adamjee Insurance

9.38

27%

EFU General Insurance

8.96

25%

National Insurance Co Ltd

4.25

12%

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)

23

Miscellaneous Insurance: Other insurance covers not

Human Resources

classified above Gross premium for this line in 2007 was Rs 4.44
Billion (2006: Rs. 3.48 Billion)

The industry should develop human resources for greater

utilization of IT resources and to improve competitive edge and
services.

Allianz EFU - first specialized insurance company of Pakistan.

Gross premium in 2007 was Rs 800 million (2006: Rs 600 million)

NICL - was formed in 1976 to undertake General Insurance

business relating to any public property. In 2007 gross premium
written was Rs. 4.25 billion.

Reinsurance:

Pakistan Reinsurance Company Limited

(PRCL) was formed by the Government of Pakistan to provide
reinsurance capacity to the local insurance industry.
A number of foreign reinsurers from Europe, Middle East and Asia
are also supporting this market.

Distribution Channels:

General insurance is sold

primarily through agents, although brokers have now been
recognized under Insurance Ordinance 2000. Both are regulated by
SECP.

Insurance Surveyors and loss Adjusters - An

independent body licensed by the government to give professional
opinion regarding the cause and extent of loss.
InsuranceAssociation of Pakistan (IAP) - InsuranceAssociation
of Pakistan (IAP) is a member body of a federation and practically
all-private insurance companies are its members. The main
functions of IAP are to promote cause of insurance business in
Pakistan.

ISSUES
Riot Losses 27 December
Riots of 27 December after assassination of Mohtarma Benazir
Bhutto caused huge deficits for the Insurance Industry. In future
such riot losses of this nature will not be payable.

Insurance Database
Development of Database at Insurance Association of Pakistan
level may promote good underwriting practices and avoid
frauds/malpractices.

24

Bogus Insurance companies

The general insurance industry is facing prevalence of bogus
insurance companies issuing spurious Motor vehicle Third party
insurance Polices for motor vehicle for Registration Purposes.

Takaful Insurance
A perception that conventional insurance is not allowed in Islam
was another cause of low penetration. In order to address this
Government had promulgated Takaful Rules in 2005, allowing
dedicated Takaful companies to start writing business. Three
Takaful operators have started general Takaful operations. Window
operations have also been principally allowed, although the
industry is waiting for this amendment to the rules, which should
boost the industry as a whole.

Insurance of Public Properties

The insurance of public properties should be opened to the private
sector.

CHALLENGES
Insurance in RuralAreas - so far a failure in penetration
Agriculture Insurance - a primary threat that is not insured
Bancassurance

- Another emerging distribution channel

which insurance Companies are aggressively following and the
business emanating from this Channel is likely to increase
substantially in the next 3 to 5 years.

E-Commerce - A new technology for selling insurance. In

Pakistan a couple of Insurers are able to provide quotes through
their websites.

The future
The future looks very positive for the non-life insurance market in
Pakistan. Although there are many challenges ahead, the low
penetration in the non-life sector, and strong economic growth are
two factors likely to lead to significant premium growth in the years
ahead.