The document summarizes the insurance industry in Pakistan. It discusses the history and types of insurance companies including life insurance companies, general insurance companies, and Takaful insurance companies. It also discusses the performance and growth of the insurance industry from 2002-2007, including increases in assets, capital adequacy ratios, reserves, and profits of insurance companies. The challenges faced by the industry are also mentioned.

1. Chapter 19: The Insurance Industry
Presented By:
SANAULLAH
ZOHAIB AHMED
TAHIR ZAMAN
Money and Banking in Pakistan
6th edition
By: S.A Meenai
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2. INTRODUCTION
• Discussing the History of Insurance industry
• Challenges faced by the industry
• Performance of insurance industry.
• Contribution of different insurance companies to
insurance industry.
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3. OUTCOMES
• Insurance industry introduction and brief history.
• Financial performance of insurance companies.
• Contribution of insurance companies to over all growth
of insurance industry.
• Types of insurance companies.
• Working of insurance companies.
• Reinsurance company in Pakistan.
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Insurance Sector Of Pakistan
• The insurance sector in Pakistan comprises of:
• one general re-insurance company
• Five life insurance companies
• 52 non life insurance companies (General insurance companies)
• Three Takaful companies (2009)

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Life Insurance Companies
Life insurance is a contract where by the
Insurer , in consideration of a premium paid
either in lump sum or in periodic installment
Undertakes to pay an annuity certain sum of money
Either on death of the insured or an expiry of a certain
No of years which ever is earlier.

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General Insurance Company
General insurance or non-life insurance policies,
including automobile and homeowners policies, provide
payments depending on the loss from a particular
financial event. General insurance is typically defined as
any insurance that is not determined to be life insurance.

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Takaful Insurance Companies
Takaful is a co-operative system of reimbursement or
repayment in case of loss, paid to people and companies
concerned about hazards, compensated out of a fund to
which they agree to donate small regular contributions
managed on behalf by a Takaful Operator

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• Since FY 2003 the number of foreign companies in both
life and general Insurance has decreased
• To attract/ retain the foreign investment in insurance
sector, SECP has devised some strategies
• 2003-09 Assets are increased from Rs.150 to Rs.450 b
• 2007-11 Capital adequacy ratio has increased from Rs.300
to Rs.500 b

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• 2002-07 Reserves and net earnings increased from Rs.10 to Rs.60 b due
to increase in profitability level in insurance sector
• 2003-08 ROI increased from 15% to 50% due to buoyancy of the stock
market and insurance industry associated capital gains
• No ceiling on level of equity investments by insurance companies.
• Greater portion of investment in government securities (T-bills and PIBs).

16. • Insurance companies can replace DFIs.
General insurance companies performing better than life
insurance companies in recent years.
Net premium of these companies has tripled during 2002-07 .
At the end of 2007 net premium amounted to Rs. 23 billion.
• Insurance business in Pakistan has a relatively high risk profit.
Claim ratio stood 65% in 2007.
• Claim ratio has continued to rise during 2008 and 2009.

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• Capital adequacy ratio has remained stagnant during 2002-2007
despite growth in equity.
• The paid up capital to total equity ratio has fallen from 41% in 2002
to 14% in 2007.
• Claim ratio has risen by 10 percentage points during 2002-2007.
• Risk retention ratio has fallen from 70% in 2005 to 52% in 2007.
• Life insurance companies had 59% share in total assets of
insurance industry in 2007.

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• In 2007 only five companies operating in insurance industry.
• They invest in government securities during 2002-2008
about 80% of investment income came from securities.
• During 2001-2007 claim ratio for life insurance has been
lower than that of general insurance sector.

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Pakistan reinsurance company ltd.
• State owned in terms of assets consists of 3.2% of total insurance
industry assets.
• Total assets were 10.4 billion in 2007 as against 6.4 billion in 2006.
• Paid up capital has risen seven folds.
• Investments have more than tripled.
• From 2001-2007 profits have risen from 67 million to 3.7 billion.
• Risk is being shared with international reinsurance companies.
• SECP yet to develop regulatory framework for Takaful industry.

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