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ReportPakistan outlines rules for insurtech: Here is what you need to know

Pakistan outlines rules for insurtech: Here is what you need to know

The Securities and Exchange Commission of Pakistan (SECP) has released draft guidelines for digital-only insurers and microinsurers as it looks to nurture insurtech and Takatech start-ups as part of a greater ambition to digitalize financial services.

The draft framework entails amendments to the Insurance Rules of 2017. The 13-page draft viewed by IFN Fintech defines digital-only insurers and also stipulates requirements such as technology capacity, governance, consumer protection, cybersecurity and product development, among others.

Among the most salient points include the following:

  • A digital-only insurer is defined as an insurer which solely relies on technology to operate and does not use any other mode for distribution, administration and servicing or for performing any other aspect of its insurance operations
  • Digital-only insurers are required to secure regulatory approval to conduct a pilot test for at least one year before being assessed for operational readiness
  • The digital insurer must have at least two directors on its board with at least five years of experience in digital financial services, insurtech or fintech, preferably at senior level
  • Digital-only insurers will need to comply with the SEC Guidelines on Cybersecurity for Insurance Sector, 2020 and to formulate a cybersecurity framework, and
  • Digital-only insurers have a lower minimum paid-up capital requirement as compared with traditional insurers as outlined in Table 1.

Table 1: Minimum paid-up capital requirement

Types of insurersAmount in PKR million
Life insurers700
Non-life insurers500
Life microinsurers150
Non-life microinsurers80
Life digital-only insurers150
Non-life digital-only insurers80

“The initiative, based on global developments concerning insurers operating on a digital-only basis, will be further complemented by recent developments in the payment systems landscape. Moreover, the new framework does not prohibit existing entities to underwrite microinsurance or distribute insurance through digital modes,” the SECP explained. “The objective of the proposed amendments is to encourage innovation, improve competition, widen product range and enhance financial inclusion, while aiding in the reduction of entry barriers through lenient regulatory requirements, in terms of the minimum paid-up capital and solvency regime.”

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