RBC regime concept paper issued

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has issued a concept paper on Risk Based Capital (RBC) regime, outlining a possibility of shifting from existing solvency-based regime towards an RBC regime for the country’s insurance sector, a statement said on Thursday.

The SECP stated that the proposed framework was consistent with international best practice, aimed at improving corporate governance, enterprise risk management and public disclosure practices of insurers.

The existing requirements of Insurance Ordinance 2000 and Insurance Rules 2017 prescribe a rule-based capital adequacy framework for insurers in Pakistan.

While focusing on overarching principles, the concept paper contains clear and consistent valuation standards (including explicit best estimates of technical provisions and risk margins) and risk-sensitive capital requirements covering all types of risks which individual insurers are bearing, according to the SECP.

The regulator said the paper also deliberated on the calculation, levels of capital adequacy, methodology for available and required capital and difference risk capital charges.

The paper is based on the recommendations of the Technical Working Group (TWG) formed by the SECP. The TWG was composed of officials of Pakistan Society of Actuaries, SECP representative and actuary from the private sector.