By Moaaz Manzoor

Pakistan’s proposed Insurance Bill, 2026, seeks to open the insurance market to foreign insurers and reinsurers, recognize digital-only and microinsurance companies, and require insurers to process claims without delay, according to a document available with Wealth Pakistan.

The proposed bill, placed before the Sub-Committee of the National Assembly Standing Committee on Commerce, marks a major step to modernize the insurance framework, which is still governed by the Insurance Ordinance, 2000.

The document identifies several shortcomings in the current legal framework, including limited market opening, insufficient alignment with international supervisory standards, restrictions on innovation and digitalization, inadequate supervisory authority, and weaknesses in market conduct and governance.

The most significant change for the market is the proposed opening of the insurance sector to new players. Under Section 5, foreign insurers and reinsurers would be allowed to open branch offices in Pakistan. The document notes that the existing law restricts branch operations, limiting market entry and competition.

The bill also proposes changes in the reinsurance market under Section 40 by allowing the first right of refusal to such reinsurer or reinsurers as the federal government may notify. This seeks to move the sector away from protected structures and towards a more competitive framework.

Another major proposed reform is the opening of public property risks to private-sector insurers under Section 184. The existing framework gives the National Insurance Company Limited (NICL) the right to insure public property, creating protected arrangements in that segment.

For consumers, one of the most important proposals is the recognition of dedicated microinsurers and digital-only insurers as separate categories under Sections 2 and 5. This could support low-cost insurance products, digital distribution, and wider access for small businesses, lower-income households, and underserved areas.

The bill also proposes an enabling framework for reinsurance brokers, third-party administrators for health insurance, and other insurance intermediaries under Sections 2, 101, 102, 121, and 187. It further authorizes partnerships between life and non-life insurers to promote microinsurance under Section 132.

Ease of doing business is another key part of the proposed reforms. The bill proposes perpetual licences for market participants, abolition of annual licence renewal requirements for brokers and surveyors, and removal of licensing requirements for authorised surveying officers under Sections 8 and 104.

The document also lists new enabling provisions for insurance products and emerging market intermediaries, including web aggregators, insurance self-network platforms, technology-based surveyors and corporate insurance agents. These changes are linked to Sections 2, 102, 121, and 187.

To support digitalization and data sharing, the proposed law introduces a regulatory framework for insurance repository and information-sharing mechanisms under Section 129. It also proposes aligning regulatory submission requirements with the Companies Act under Section 51.

Policyholder protection has been given a central place in the bill. Under Section 126, insurers would be required to process claims without delay, while the commission would be empowered to prescribe requirements and timelines for claim settlement. The role of the Insurance Ombudsman is proposed to be extended to public-sector insurers under Section 127.

The other consumer-focused measures include broader dispute-resolution powers under Section 125, limits on maximum management expenses under Section 69, clearer presentation of policy benefits under Sections 82 and 83, claw-back of commission and refund of premium in cases of mis-selling under Section 187, and prohibition of in-house surveys by insurance companies under Section 102.

On governance and solvency, the bill proposes a Risk-Based Capital Framework under Section 39, action plans for shortfalls in solvency requirements under Sections 34 and 35, fit and proper criteria for sponsors and major shareholders under Section 11, macroprudential supervision under Section 131, and a guarantee fund for insurer insolvency under Section 187.

The proposed law also seeks to strengthen supervisory powers, including licence cancellation under Section 8, expanded powers to call information under Section 62, broader inspection powers under Sections 59, 60, 117, 170 and 173 to 176, and authority to issue circulars, directives, codes and guidelines under Section 188.

The document shows that the reform process began in June 2024 with draft amendments to the Insurance Ordinance, 2000. Public comments were invited in January 2025, stakeholder consensus was reached later that year, and the draft bill then progressed through approval stages before being submitted to the parliament.

For Pakistan’s insurance sector, the proposed bill signals a shift from a restrictive and overly prescriptive regime towards one focused on competition, digitalization, stronger supervision and consumer protection. Its impact will depend on whether the reforms can attract credible market players, expand insurance access, and improve public trust in claim settlement.

Credit: INP-WealthPk