Strengthening Insurance Regulatory and Supervision Framework in Pakistan

Project Development Objective (PDO)

The aim of this project is to reform and upgrade the legal, regulatory, and supervisory framework for the insurance sector in Pakistan in order to increase stability in and contribute to growth of this sector. 


Presently, Pakistan’s insurance legislation provides a general framework for insurance supervision. However, the Security and Exchange Commission of Pakistan (SECP) has gaps in its supervisory authority that limit the effectiveness of insurance supervision overall. Currently, SECP does not have full authority over state-owned insurance companies, which are significant market players. 

In addition, SECP does not have effective supervisory authority over Motor Third-Party Liability (MTPL) insurance. MTPL insurance is widespread and is purchased from issuers not supervised by SECP. SECP lacks authority to enforce licensing requirements for MTPL or supervise it. In addition, the provincial governments lack the capacity to effectively supervise this line of business. 

Further, even in areas within SECP’s supervisory remit, the current regulations and supervisory processes emphasize compliance requirements, whereas more proactive insurance regulators around the world have demonstrated a strategic balance between market development and risk-based regulation. Similarly, a pressing need exists for improving supervisory capacity in the Insurance Division of SECP.


The main activities of the proposed technical assistance are as follows: 

     1.    Enhancing the efficiency of the insurance regulatory and supervisory system 

     2.    Reducing segmentation of insurance markets with the help of a unified regulatory regime

     3.    Improving the financial soundness of the insurance industry

The project’s focus is to identify and address gaps and anomalies in the existing regulatory structure in order to harmonize the regulatory framework and enable coherent supervision. SECP will build a risk-based supervisory approach accordingly. 

The project team provides technical support in drafting the amendments to the Insurance Ordinance, 2000 to give SECP adequate authority across the sector. The project has expanded to deliver not only a comprehensive paper and recommendations on strengthening the regulatory framework for the insurance sector but also an international legal and regulatory comparison. The draft regulations and rules, based on risk management best practices, include provisions on technical reserves, minimum capital, investment, and corporate governance. To build insurance supervision capacity, the team is also drafting supervision manuals and providing training.

Expected Outcomes

The main expected outcomes of the project include the following:

1.  Approval of the amendments to the Insurance Ordinance, 2000 and the related implementing 

2.  A modernized, upgraded legal and regulatory framework for insurance supervision

3.  Adoption and application of supervision manuals

4.  Increased insurance supervision capacity

5.   Approval of regulations and adoption of policies that strengthen risk management, 
     improve corporate governance, strengthen a minimum capital regime, and enable better 

6.  More consistent and effective enforcement of risk-based supervision