The American Business Council (ABC) of Pakistan has proposed to the government to allow international insurers, which meet local minimum capital requirements, to open branches in the country.
The aim of the proposal includes attracting foreign direct investment and helping to conserve foreign exchange in the country, reported Business Recorder.
Currently, a draft Insurance Bill, issued on 28 December 2016 is being reviewed. The ABC has sent several other suggestions to the Ministry of Commerce and Textile for its views to be taken into account in forthcoming new policies.
For example, commenting on sales tax on reinsurance premiums, the ABC said that Sindh Revenue Board has imposed a 13% tax on reinsurers. Sindh Sales Tax on Services (SST) is already charged on the insurance premium and to charge SST again on the facultative reinsurance transaction acts as double taxation on virtually the same insurance risk and also adds to unnecessary administrative burden, the ABC said.
The American business body has also proposed that there should be separate tender criteria for Pakistan registered insurance companies in accordance with their local capacity. It stated that there is a need for an integrated approach to regulations by State Bank of Pakistan (SBP) and the Securities & Exchange Commission of Pakistan (SECP) with respect to reinsurance from regional countries. There has been interaction between SECP and SBP but an outcome is being awaited.
Furthermore, the ABC said that projects financed by lenders (both international and local) contain contract clauses that require insurance claim proceeds to be deposited into offshore trustee accounts in dollars. However, at the time of settling claims involving such projects, processing at the SBP is very slow with unnecessary documentation being sought from insurers and in most cases a denial of permission is made for claim settlements outside the country.
The Council is of the view that SBP needs to comprehensively review incorporation of such clauses in loan agreements and to take a holistic approach in terms of other applicable laws affecting the transactions.