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Manager ʹ Claims & Participant Benefit Services
Pak-Qatar Family Takaful Limited
Karachi, 7 November, 2010

ï ecap͙
½ Difference b/w Insurance & Takaful
ï Family Takaful Products͙
½ Unit-linked and Term Plans
ï egulatory Framework of Insurance & Takaful markets
ï Local Insurance/Takaful industry
½ Market Players
½ Distribution Channels

TAKAFUL CONVENTIONAL INSUANCE ecap͙ Difference b/w Conventional Insurance & Takaful .

it j  has reservations with the process͙ .m m     concept of Insurance? ? process of Insurance? Shariah has no objections as to the concept or objectives of insurance .

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ï Unit link Plans ï Endowment Plans ï Term Plans .    .

m  ï eneral membership provisions ï eneral membership conditions ï Participant investment Account ï Individual Family Takaful Participant͛s Fund .

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cover under this PMD shall not commence until the contribution. signed by an official of Takaful Operator. . has been paid or guaranteed to be paid in the manner as stated in the PSS or as expressly agreed and stated therein.    ï No payment in respect of any contribution shall be deemed to be payment to the takaful operator unless a printed form of receipt for the same. shall have been given to the Participant. ï Notwithstanding anything to the above. as stated in the PSS hereof.

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which shall have civil and criminal jurisdiction. Ministry of Commerce ï    1222     -./0 ï The Insurance Act 1938 still valid in India & Bangladesh ï Insurance Industry regulated by Controller of Insurance./0 ½ Insurance Ordinance 2000 covers all types of insurance business in Pakistan including Takaful ï Provides for regulation of insurance industry by SECP ï Capital equirement ½ Life: from PK 100mn to PK 150mn ½ Non-Life: from PK 0mn to PK 80mn ï Minimum Solvency margin not fixed ï Provision for institution of an Insurance Ombudsman who shall have the authority to investigate mal-administration and redress grievances of insurers ï Provision for constitution of an Insurance Tribunal.)    ï   -. both ï Small Disputes esolution Committee for speedy claim settlements .

reinsurance. applicable to all insurers ï    1226 ½ Notified under the Insurance Ordinance 2000.)   3 45 ï    1221 ½ Addresses variety of insurance related matters and amplifies those stipulated in the 2000 Ordinance ½ Deals with specific details like admissibility of assets. deals with specific additional requirements for Takaful Operators ï Composite operations not allowed ï Window Operations not allowed ï Provision for Central Shariah Supervisory Board at SECP level ï Takaful Operator shall appoint a Shariah Board. licensing documents etc. at least 3 members ï Minimum Paid-up Capital Life: PK 500mn . non-Life: PK 300mn ï Minimum Solvency Margin = Admissible Assets ʹ Liabilities ï Minimum Statutory Deposit = higher of PK 10mn or 10% of paid-up .

SECP withdrew its proposed amendments to the Insurance Ordinance 2000 citing changes in the domestic and international financial environment ½ Most contentious amendment concerned the proposal to register foreign reinsurance brokers or agents who do business in Pakistan ï m         )   )     7 ½ !   )       .)   3 45 ï    1226 3 45 ½ isk Management component shall be based on Wakala ½ Investment component shall be based on Modarabah ½ Each Operator shall maintain 2 separate funds: Shareholder Fund (SHF) and Participants Takaful Fund (PTF) ï In 2009.

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non-life). Development. esponsible for ½ Supervision. Takaful Operators. the Pakistan Insurance Institute. Insurance Intermediaries and bodies connected with insurance such as Insurance Association of Pakistan.m   ï Insurance Department of SECP supervises the insurance market. and egulation of the insurance sector (Life. and the Pakistan Society of Actuaries ï SECP was set up in accordance with the provisions of SECP Act 1997 ï  .

statutory returns.      6  )     : ½ Life Insurance: analyses periodic accounts. treaty reinsurance arrangements and other statements furnished. ensuring that at all times they meet minimum regulatory requirements such as those for capital and solvency ½ egulation ½ Non-Life Insurance ½ Complaints ½ esearch & Development .

51 Insurance Ordinance 2000).m  3 45 ï        (      --3/5     1222(     6 . Online filing facility available.000 ½ PK 1 per thousand of gross direct premium written ½ Such amount as may be prescribed ï m  : ½ All insurers have to file quarterly as well are annual returns (Section No. Digital Signatures for security arranged by National Institution Facilitation Technologies (NIFT) ï Quarterly: Within one month from close of quarter ï Annual: Within four months from close of preceding year ½ Insurance Tribuals will adjudicate in the case of persistent non- compliance with the rules about statutory returns .     (     ) : ½ PK 100.

it may investigate the affairs of the insurer. and wherever necessary.m  3 45 ï   )  : ½ Section No. 59. if SECP ͞believes in reasonable grounds that an insurer is or is likely to become unable to meet its liabilities or that there has been or is likely to be a contravention of the provisions of the ordinance or the rules made there under by the insurer. employ an auditor or actuary or both for assisting it in any investigation ½ There is no statutory fund for compensating policyholders of insolvent insurance companies ½ Statutory deposits placed with SBP. at time of insurer͛s registration. can be used to pay compensation in case of insolvency . Insurance Ordinance 2000.

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125 of Insurance Ordinance 2000: setting up of an insurance ombudsman ½ Difference in the responsibilities of the Insurance Tribunals and the Ombudsman is that the former responds to complaints from the SECP whilst the latter handles those from the insuring public ½ SECP Circular No.     : ½ Each party can select its own arbitrator or mutually agreed arbitrator ½ They have the right to appeal to the Claims Settlement Board. which is a government department ½ Section No. 121 of Insurance Ordinance 2000: establishment of insurance tribunal ½ Section No. 5 of 2008 reminds insurers that Section 126 of Insurance Ordinance states that the cost of maintaining of Ombudsman͛s secretariat would be shared by insurance companies and Takafuls in such proportions as may be determined by SECP .

2005 ½ Development of unit-linked/products egulations ½ Amendments in Insurance Ordinance. Standards.  m   ï ole of SECP in Insurance Sector ½ Protection of the interest of insurance policyholders ½ Amendments in the regulatory framework ½ Enhancements of regulatory framework for Takaful ½ Availability of insurance protection to less privileged segment of the society (Microinsurance) ½ Insurance Awareness Programs ½ Enhanced public image of the insurance industry ï Future Plans ½ Development of ͚Fit and Proper͛ criteria for Management of Insurance companies ½ Development of Terrorism Insurance Pool ½ Development of Microinsurance egulations ½ eview and amendments in Takaful ules. and uidance ½ Development of Commercially Viable and Sustainable Crop Insurance Scheme . 2000 ½ Assessment and Implementation of IAIS Principles.


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Charter. Deed of Settlement or MoU ï List of Shareholders and Details of Board Members ï Business Plan showing projected Business to be written and cash flows for a period of 10 years from the date of application ï Details of policies. ½ Section 6 of Insurance Ordinance 2000. products. and investment custodian. actuarial notes. and basis of reserving ï Details of management. if any ï Statement of authorized and paid-up capital of the insurer . legal representative and domicile ï Statement of proposed reinsurance arrangements ï Name and Address of Banks. an application for registration as an insurer must contain the following information: ï Copy of the Statute.


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both companies have to be separately incorporated ï   )   ½ Circular No. the government has allowed 100% foreign equity in the insurance business subject to following conditions: ï Minimum amount of PK 329. 5 of 2007 states that in the interest of consistency and uniformity in the foreign investment policy governing various service sectors and to make the environment more conducive to attracting foreign investment.2mn . of which PK 16 .3 45 ï     ) <  ½ Composite licenses not available.6mn should be brought from abroad ï No restriction on number of branches ï No restriction as to whom they shall employ .


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3 45 ï      ½ New companies may be authorized for either life or non-life business ½ Composite licenses not available ½ Healthcare and personal accident business can be written by both life and non- life insurers ½ No separate license is required for inwards reinsurance .


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 ½ SECP͛s Circular No. 3 of 10 April 2007 ͙ increased the minimum paid-up capital for insurers over a period of four years. For life/family Takaful ï 2007 ʹ PK 350mn ï 2008 ʹ PK 00mn ï 2009 ʹ PK 50mn ï 2010 ʹ PK 500mn ï 2011 ʹ PK 500mn ï New requirements to be complied with by 31 Dec of each year ï New registrations minimum required paid-up capital is PK 500mn ½ Non-life/eneral Takaful ï 2007 ʹ PK 120mn ï 2008 ʹ PK 160mn ï 2009 ʹ PK 200mn ï 2010 ʹ PK 250mn ï 2011 ʹ PK 300mn ï New registrations minimum required paid-up capital is PK 300mn .


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statutory deposit in cash or in approved securities to the sum of ͞the higher of ten million rupees and ten percent (10%) of the insurer͛s paid-up capital ï m  !) : ½ Life insurers: not less than PK 75mn in their Shareholders͛ Fund .3 45 ï Circular No. 15 of 7 July 2008 clarified the minimum statutory deposit level for insurance/Takaful companies ½ Deposit with SBP.


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and what morbidity tables and discount rates are used . ½ Insurers are required to invest in assets equivalent to not less than the sum of: ï The amount of liabilities to holders of life insurance policies in Pakistan on account of matured claims ï The amount required to meet the liability in polices of life insurance maturing for payment in Pakistan less: ½ The amount of premiums which have fallen due to the insurer in such policies but have not been paid and the days of grace for payment of which have not expired ½ Any amount due to the insurer for loans granted and within surrender values or policies of life insurance maturing for payment in Pakistan issued by the company. or by an insurer whose business has been acquired and in respect of which it has assumed liability ½ No information is available as to whether long-term disability claims reserves are held at present value.


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derivative instruments and immoveable property ½ ule 5-B of the ITO restricts insurers͛ investment of their surplus liquidity in securities. bonds. stocks. and shares ï   . deposits of all types. securities. insurance companies are permitted to invest in debentures. )  : ½ According to Income Tax Ordinance (ITO) 1979.

companies must file their policy wordings with SECP ½ Local policies. with the exception of personal accident. They are issued in English with sums assured and premiums expressed in local currency ½ estrictions in the case of death refer to suicide in which case the insurer͛ liability is limited to a refund of all premiums if the suicide is committed within 2 years from the commencement of the policy ½ If the policyholder fails to pay a premium during a period before 2 full years͛ premiums have been paid. the policy will lapse ½ Article 39 Insurance ules 2002: 1 day cooling off period is mandatory for individual life policies the term of which is for more than one year .     : ½ No Supervisory control over policy wordings ½ Use Plain English and avoid ambiguities ½ At time of registration. include a Pakistan jurisdiction clause.

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20 per thousand of the sum assured ½ Annual Supervision Fee is paid to SECP ½ SECP͛s Circular No. 5 of 2008 reminds insurer that Sec 126 of 2000 Ordinance states that the cost of maintaining the Ombudsman Secretariat would be proportionately shared by insurance and takaful companies.    9 ½ Life policies are subject to a stamp duty of PK 1. as determined by SECP ï #   ) 9  .


standard corporate income tax rate is 35% ½ Tax is levied on the total amount of income earned from all sources in the company͛s accounting period. therefore. ½ Small companies are subject to a tax at a rate of 20%. or the local agent of an overseas insurer ï    9  ½ For the year 2009. including dividends and taxable capital gains. a withholding tax of 5% applies to the gross insurance or reinsurance premium paid to an overseas insurance or reinsurance company. If their turnover for the year exceeds PK 250mn. the tax rate ranges from 25% to 35% ï   9  ½ There is no tax relief on individual life premiums ½ Lump sum payments under life policies purchased in a personal capacity are normally viewed as capital receipts and.    ½ Finance Act 2008. considered beyond the scope of income and the charge of tax .


US$ . Pakistan occupied 58th position in the world life ranking in terms of annual premium income. behind Cyprus and ahead of Bangladesh ï Premium Income in 2008.!m < ï In 2008.

!m < ï Market Premiums in US$ for the five-year period to 2008 .

!m .

!  ï Market Premium in 2008 as % of DP and expenditure on a per capita basis (USD) .

Adamjee Life Assurance Co. specialist healthcare insurer.35% of the market in 2008 ½ In 2009. entered the market ½ NJI͙ subsidiary of Aga Khan Fund for Economic Development (AKFED) based in Switzerland ½ ALICO͙ locally incorporated subsidiary of the US Multinational AI ½ Pak-Qatar Family Takaful Limited.. Family Takaful: 2 ½ Leading is SLIC with 65.!   ï Conventional Life: 6 . a Pakistani Operation . was granted operating license ½ In 2009. AsiaCare Health and Life Insurance Co. Ltd. Ltd. 100% Qatari Investment ½ Dawood Family Takaful Ltd.

until 199 when private operators were readmitted to the market ½ Has dominant Market Share of 65.ï Privatization / Deregulation ½ In April 2009.38% (2008) . and the Pakistan einsurance Company (Pak e) ï Stated owned Companies ½ SLIC is the only state-owned life insurer in Pakistan ½ Enjoys monopoly from 1972. when it absorbed the business of 32 private life offices following their nationalisation. including National Insurance Company. Ministry of Privatization drafted a proposal to privatize several state-owned entities including a number of insurance companies ï A total of 23 public sector companies have been named in the overnment͛s Public Private Partnership Initiative. SLIC.

!m= .



 1220 .

    ï Assets per insurer for the year 200 to 2008 inclusive (PK) .


government considered granting permission for insurance companies to invest in National Savings Scheme (NSS) . the Insurance ules 2000. ï Investments are made in accordance with provisions of the Insurance Ordinance 2000. and regulatory order SO (309) K of 1970 ï April 2009.

salaries and related costs accounted for 18. however. 9  ï No information about market wide expense ratios. Data for SLIC. are available for 2007 and 2008 ï In 2007.3% .7% of management expenses whilst in 2008 the percentage was 17.

a increase of 31% and 28% ½ EFU Life suffered a before tax loss of PK 73mn and an after tax loss of 88mn . In 2007. 35mn and an after tax profit of PK 1. company made a before tax profit of PK 1.207mn .    ï No market-wide information is available ï Life: ½ SLIC recorded a before tax profit of PK 6mn in 2008 and an after tax profit of PK 296mn.

5mn for individual business ï Private Insurers: ½ ange from PK 500.000 .000 to PK 800.  ï SLIC: ½ ange from PK 2mn per life for group business to PK 2.000 ï Minimum etention level is PK 00.

under Section No. both local and foreign ½ SLIC is not a member ï Four Specialist Committees: accident. marine. fire.     ï The Insurance Association of Pakistan (IAP) was established in 19 8 and incorporated in 1961. and life . 26 of the Companies Act 1913 ï Current membership consists of life and 32 non-life companies.

Hannover e. and Swiss e ½ Munich e has withdrawn from all non-life treaty arrangements in Pakistan ï ALICO uses parent company arrangements (with AI.5mn ï SECP demands that reinsurance arrangements are placed only with insurers having at least an ͞A͟ rating from a reputable international agency .   ! ï There is no local Life einsurance company ½ Pakistan einsurance Corporation Limited (Pak e or PCL) is for non-life market ï All direct life insurers use international reinsurers. mainly Munich e. USA) ï Market retention level is PK 2.

     ï Agent-oriented network is the dominant distribution channel ï Cash and Carry agents: Minority of agents operator on independent basis. working with a number of companies ï Insurance Ordinance 2000 and Insurance ules 2000 permit establishment of insurance brokers in the market ½ Only brokers have taken advantage of the legislation. for non-life ï Distribution of insurance products online is not yet a force in market ï Potential for telesales given that there are 90million mobile telephone accounts .

print media. ! ) ï 90 million mobile telephone accounts in the country. hoardings etc ï No statutory restrictions on direct marketing . there is potential for telesales ï Banks send publicity material to customers with their monthly bank statements and follow this up with a telephone call ï Life insurance industry has increased its investment in advertising during the past five years.

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008 cities and towns by June 2008 ï Optical fiber networks were available in 550 cities in June 2007. compared with 53 cities in August 2000 ï Pakistan had 180 internet service providers (ISPs) in June 2008 ï Adamjee Life. there were an estimated 3. which received its operating license in 2009. has introduced a ͞buy online͟ facility ï egulations for the use of electronic signatures are included in the Electronic Transactions Ordinance 2002 . economic survey of 2007-08.5 million internet subscribers and about 17 million users in March 2008 ï Internet access expanded from 29 cities in August 2000 to 3. ï According to ovt.

% ï Banks act as insurers͛ corporate agents ½ EFU Life has links with Barclays and Faysal Bank ½ NJI. banks sell insurance ͞over the counter͟ to their customers ½ Insurers do not have their own sales desks on bank premises or their own resident officials ½ Bank branches͛ customer relationship manager sells insurance . which has also has a management control of the HBL. one of its shareholders ï Banks͛ shareholdings in insurance companies are restricted to 30% ï Other than telesales. has Bancassurance alliance with it ½ Adamjee Life has a distribution agreement with MCB.

Other benefits include annual incentives such as: ½ Mobile Telephone ½ 70cc Motorcycle ½ Computer notebook ½ 800cc to 1000cc Car ½ Overseas conventions ½ Million Dollar ound Table Conferences in US (MDT) ½ roup Life Insurance ï Products sold are mainly individual life insurance products . m   ï Senior agents or Sales Managers earn a monthly stipend and commissions on sales.

supervision. ½ Since Insurance Ordinance 2000. )  ï It is estimated that there are around 85. life insurance agents are prohibited from becoming directors of life insurance companies .800 ½ ALICO has around 700 ï Insurance agencies are regulated by Articles 9 to 101 of the Insurance Ordinance 2000 and Articles 25 and 26 of the Insurance ules 2002. agents are no longer subject to licensing by the regulator ½ Insurers are obliged to enter details of their agents in a register and are responsible for their conduct ½ Agents pay no fee for registration ½ SECP plays a supervisory role in respect of compliance by each insurer͛s management in relation to appointment. and commission levels so that the interests of policyholders are protected ï Minimum academic qualification is Matriculate ï Section 101 of the Insurance Ordinance 2000.000 agents in the Pakistani life market ½ SLIC has around 80. qualification.000 ½ EFU Life has around 1.

ï Minimum paid-up capital: PK 10mn for local companies and PK 82.%  ï Insurance Ordinance 2000 and Insurance ules 2002 permit the establishment of insurance brokers in market ½ Only brokers have taken advantage of this legislation ï Aon Insurance Brokers (Pvt) Ltd ï reenShield Insurance Brokers (Pvt) Ltd ï isk Management Services (Pvt) Ltd ï oma Associates Ltd.000 needs to be deposited with a bank .3mn for foreign companies ï Cash or Approved securities of not less than PK 500.

Jazaak Allah Khair for your patience .