SECP amends Credit, Suretyship Rules to promote risk management by insurance companies

ISLAMABAD, Jul 18 (APP): The Security and Exchange Commission of Pakistan (SECP) on Monday notified amendments in the Credit and Suretyship (Conduct of Business) Rules, 2018, in order to promote implementation of sound principles of risk management in credit and suretyship businesses of insurance companies.

“The amendments require insurance companies to develop a risk assessment mechanism to evaluate technical and financial strength of the persons on whose behalf the bond/guarantee is being issued,” an SECP press release said.

It was intended to assess the principal obligors’ experience and expertise to carry on the project work, as well as their financial strength, it added.

In order to optimally utilize the local absorption capacity available within the country, and to curtail the outflow of reinsurance cessions abroad, the SECP delinked the collateral requirements from reinsurance arrangement. It also reduced the cash collateral requirement to 10 percent of the bond value.

The S.R.O 1010(I)/2022 covering the amendments to the rules is available on the SECP’s website.