The Securities and Exchange Commission of Pakistan (SECP) has revised net retained exposure limit and collateral requirements for insurers engaged in credit and surety insurance business.
According to draft amendments to Credit and Suretyship (Conduct of Business) Rules issued by the SECP, an insurer’s net retained exposure under any type of guarantee/bond issued by the insurer to a party or a group shall not exceed 2.5% of the insurer’s shareholders’ equity as per the latest available audited accounts of the insurer on the date of issuance of a guarantee/bond, reported Business Recorder.

Subject to the limit prescribed, an insurer shall procure collateral in case of guarantees/bonds of an amount equivalent to at least 10% of the sum insured/amount of bond/guarantee.

An insurer shall, at all times, ensure that the aggregate net retained exposure on all outstanding and in-force guarantees/bonds, on which these rules apply, shall not exceed the greater of 100% or such other percentage as the Commission may notify from time to time through notification, of the insurer’s shareholders’ equity, the SECP added.

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