SECP’s debt plan for insurers

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has published a concept paper and draft amendments to the Insurance Rules 2017 to solicit public comments on the issuance of subordinated debt by insurance companies and its treatment for solvency purposes, the regulator said on Tuesday.

The concept paper aims to examine how subordinated debt can strengthen the financial stability and risk management capabilities of insurance companies, offering them an alternative source of capital, the SECP said in a statement.

The paper also explores the regulatory framework for subordinated debt securities, aiming to enable insurance companies to efficiently utilize eligible subordinated debt in their solvency calculations. The proposed framework covers the eligibility criteria, issuance process, disclosure requirements, and supervisory oversight of subordinated debt.

Issuance of subordinated debt under the proposed framework has the potential to bring several benefits to the insurance companies, such as the ability to maintain solvency margins, engage in alternative capital raising, enhance creditworthiness, and provide the capacity to absorb risks during financial stress.

As new debt instrument issuers, insurance companies' subordinated debt issuing can also significantly contribute to the growth of Pakistan's corporate debt market.

The concept paper and proposed revisions are part of the SEC's Insurance Division's efforts to support a five-year insurance sector development plan for sustainable growth and insurance for all in Pakistan, the statement said.

The SEC has invited comments from the public, stakeholders, and experts on the concept paper and draft amendments by Nov 30, 2023.