The COVID-19 pandemic has led to muted premium performance in 2020 in both the life and non-life sectors of the insurance industry in Pakistan, says the central bank, the State Bank of Pakistan (SBP), in its 2020 financial stability review.
Gross premiums in the life insurance sector increased by 2.9% to PKR201bn ($1.25bn) in 2020. There was a decline in sales of new individual life policies (first-year and single premiums) owing to the imposition of the COVID-19-related lockdown. Group business, however, grew.
In the non-life sector, net premiums declined by a small margin of PKR2bn (or 4%) to PKR47bn for the year ended 31 December 2020, mainly driven by a decline in motor premiums.
Net claims for the life sector increased last year due to a spike in surrender claims while net claims for the non-life sector declined mainly due to a fall in motor claims as a result of movement restrictions in COVID-related lockdowns.
Given the uncertainty surrounding the domestic vaccination campaigns and the emergence of new strains of the virus, growth in the insurance sector will remain dependent upon the effective handling of the pandemic, says the SBP in the report.
Despite the impact of COVID-19, the insurance industry of Pakistan increased its asset base by 13% at the end of 2020 to PKR1,871bn.
Foreign ownership in the insurance industry
Domestic stakeholders mainly own the companies operating in the insurance sector of Pakistan, in which the public sector plays a leading role as it owns and controls some of the leading insurance companies.
Only one non-life insurer — with a market share (in terms of asset base) of less than 1% of the combined non-life & general takaful sector — is a wholly-owned subsidiary of a foreign investment firm. While an international development agency has significant shareholding in one non-life insurer, which has a market share of 7.98%, two other small-sized non-life companies (i.e. a non-life insurer and a general takaful company) also have significant foreign shareholdings.
In the life sector, an insurer with an 11.56% market share is the subsidiary of the same international development agency. In addition, one family takaful company — with a limited market share in the combined life & family takaful sector — has a significant foreign shareholding.
Thus, the risk of cross-border spillovers remains minimal for the industry.