SECP constitutes working group to develop risk based capital regime

The Securities and Exchange Commission of Pakistan (SECP) has constituted a working group of actuaries for the development of the Risk-Based Capital Regime in Pakistan. The group members possess local as well as diversified international experience.

An insurance company during the normal course of operations is not only exposed to risk in relation to insurance contracts that it underwrites, but also to a variety of other risks including market risk, liquidity risk, credit risk, operational risk, etc.

Currently, compliance-based paid-up capital requirements and solvency requirements are levied on insurance companies. The solvency regime does take into account to some extent, liquidity risk, credit risk, market risk, insurance risk, etc. in the calculation of solvency through admissibility of the assets test, however, it does not quantify the levels of different risks borne by the insurers and therefore does not deliberate on the adequacy of capital keeping in view the risks undertaken.

The majority of international jurisdictions have already shifted or have commenced work to move towards RBC Regime for their insurance sector, few of these jurisdictions include, Malaysia, China, India, Sri Lanka, Hong Kong, Turkey, etc.