Insurance Ordinance, 2000 [Amended Upto November 2011]

This set of flashcards covers the key regulatory provisions, definitions, capital requirements, and legal structures outlined in the Pakistan Insurance Ordinance, 2000.

What is the short title of the ordinance governing insurance in Pakistan?

Insurance Ordinance, 2000

Under the Insurance Ordinance, 2000, what does "Commission" refer to?

The Securities and Exchange Commission of Pakistan established under section $3$ of the SECP Act

According to the definitions, what is the "base rate"?

The effective annual rate implied by the most recent repurchase rate published by the State Bank of Pakistan for six months Pakistan Treasury Bills

How is insurance business divided for the purposes of the Ordinance?

Into life insurance business and non-life insurance business

What are the four classes of life insurance business specified in section $4$?

Class 1 (ordinary life business), Class 2 (capital redemption business), Class 3 (pension fund business), and Class 4 (accident and health business)

Which types of entities are eligible to transact insurance business in Pakistan?

A public company or a body corporate incorporated under the laws of Pakistan (excluding private companies or subsidiaries of private companies)

What must an eligible person obtain from the Commission before carrying on insurance business?

A certificate of registration

What are the core criteria for "sound and prudent management" of an insurer?

Integrity, due care, professional skills, and ensuring directors/officers are "fit and proper" persons

How many statutory funds must a life insurer maintain at minimum?

At least one statutory fund

An insurer having a share capital and carrying on life insurance business must maintain which specific fund for shareholders?

A shareholders’ fund

What is prohibited regarding reinsurance between statutory funds maintained by the same insurer?

Reinsurance between statutory funds is prohibited

What is the "A Account" in the context of life insurance surplus allocation?

The ledger account for retained earnings on participating business attributable to participating policyholders

What is the minimum percentage of surplus earned on participating contracts that must be allocated to the A Account?

Not less than $90\%$

What is the minimum paid-up capital requirement for an insurer carrying on life insurance business?

$150,000,000$ rupees (or a higher prescribed amount)

What is the minimum paid-up capital requirement for an insurer carrying on non-life insurance business?

$80,000,000$ rupees (or a higher prescribed amount)

What is the required minimum statutory deposit with the State Bank of Pakistan?

The higher of $10,000,000$ rupees or $10\%$ of the insurer’s paid-up capital

Are assets subject to encumbrances considered "admissible assets"?

No, assets subject to encumbrances are not admissible assets

What is the life insurance policy contestability limit regarding mis-statements after a policy is issued?

A policy cannot be called into question after the expiry of $2$ years from the date it was effected, unless the statement was material, suppressed facts, and was made fraudulently

Under what condition does a life insurance policy acquire a surrender value?

When the policy has been in force for not less than $2$ years

What is the time limit for an insurer to pay the surrender value at a policy holder's request?

Within one month of receiving the request

Regarding intermediaries, what is the liability of the insurer for an agent's acts?

The insurer is absolutely liable for the acts or omissions of the agent as though the agent were an employee, provided the policy holder acted in good faith

What is the minimum term of an insurance broker's license?

One year, renewable annually

Is it lawful for an insurer and an insurance broker to have common ownership or management interests?

No, ownership and management interests inter se between brokers and insurers are prohibited

What is the timeframe for paying liquidated damages on late settlement of insurance claims?

If the insurer fails to make payment within $90$ days from the date the payment becomes due or the date the claimant complies with requirements, whichever is later

What is the interest rate for liquidated damages on late claim settlements?

Five per cent ($5\%$) higher than the prevailing base rate, calculated at monthly rests

Who constitutes the Insurance Tribunal?

A Chairperson who is a serving or retired judge of the High Court and at least two other members

What is the term of office for the Insurance Ombudsman?

$4$ years with no eligibility for extension or reappointment

Which entity must handle all insurance business relating to public property?

The National Insurance Company Limited

What is the penalty for an insurer making a default in complying with the Ordinance?

A fine up to $1,000,000$ rupees and an additional fine of $10,000$ rupees per day for a continuing default

Which previous act was repealed by the Insurance Ordinance, 2000?

The Insurance Act, 1938 (IV of 1938)