Friday, 24 January, 2020

Small Insurance Companies Play an important Role in the Financial system

Small Insurance Companies Play an important Role in the Financial system

In Pakistan, small insurance companies play an important role in the financial system by providing compensation.
The financial risk to the economy, plus small insurance companies acts as an institutional investor for both capital and money.

Small Insurance Companies Play an important role in the Financial System

Like many other developing countries, It is the volume of Pakistan’s insurance industry and It’s relatively smaller than the GDP ratio. Table 5.1 shows the penetration of insurance as a proportion of GDP to the total premium. Yesterday. The size of the insurance business in different countries also depending on the insurance markets, Regulatory environment, accounting procedures, and financial development.

Further, the demand for insurance depends on potential real disposable income policyholders, individual preferences. Regarding the need for financial protection, Economic environment, interest rates, inflation, and insurance premium rates.

Table: 5.1 Insurance Penetration in CY2000 Gross premiums as a percentage of GDP at market prices

Countries Total Non-Life

  • USA 8.8 4.3 4.5
  • Brazil 2.1 1.8 0.4
  • Mexico 1.7 0.9 0.9
  • UK 15.8 3.1 12.7
  • China 1.8 0.7 1.1
  • India 2.3 0.6 1.8
  • Malaysia 3.7 1.6 2.1
  • Indonesia 1.2 0.6 0.5
  • Nigeria 0.7 0.5 0.1
  • Kenya 2.6 1.9 0.7
  • Pakistan* 0.5 0.3 0.2

Source: IRDA India Year Book 2001
Therefore, Life insurance data from balance sheets of life insurance companies. Non-life data from Insurance Association of Pakistan

Furthermore, can be from the cultural and religious aspects of a country and It also affects the development of Insurance markets in developing businesses. Countries tend to be suppliers of insurance services as demand is usually higher. These economies. In the case of Pakistan where 67.5% of the population lives in rural areas and
due to low per capita income, the insurance industry is not able to generate demand.

For Small Insurance Companies services

5.1 The structure of the insurance industry. The insurance market in Pakistan is massive Life insurance ranked in two main classes And non-life insurance. Also, the country Is an insurance company that operates Spreads out insurance activities and more Hazards. The insurance market is very highly focused on urban areas and many Insurance companies are subsidiaries of major Industrial groups that were originally forme to reduce the emission of funds in the form of Premiums. To manage their risks generate industries and profits from it.

Table 5.2: Number of Insurance Companies

  • CY00 CY01 CY02 CY03
  • Non-Life 58 52 52 4
  • State-Owned 1 1 1 1


  • Domestic 53 47 47 45
  • Foreign 4 4 4 3
  • Life 5 5 5 5
  • State Owned 1 1 1 1
  • Domestic 2 2 2 2
  • Foreign 2 2 2 2
  • Total 63 57 57 54

Source: Securities and Exchange Commission of Pakistan

However, there are currently 54 insurance companies out Out of which 49 companies offer non-life Offers insurance and 5 life insurance services (See Table 5.2). The non-life insurance industry includes six companies that also provide health care Insurance coverage

In Pakistan: Financial Sector Assessment

Assets of the insurance industry as a whole CY02 increased by 14.5% and It recorded a further increase of 15.4%

  • Table 5.3 shows the share of assets
  • Different classifications of insurance companies Of the total assets of the insurance industry.

Table 5.3 Asset Structure of Insurance Industry

  • percent share CY01 CY02 CY03
  • Life 75.8 76.0 74.3
  • State-Owned 74.0 73.4 70.5


  • Domestic 1.1 1.5 3.1
  • Foreign 0.7 1.1 0.7
  • Non-Life 24.2 24.0 25.7
  • State-Owned 10.3 9.7 9.6
  • Domestic 13.3 13.3 15
  • Foreign 0.6 1.0 1.1
  • Total 100.0 100.0 100.0
  • Total Assets (million rupees) 110,077 125,770 144,884

Source: Companies’ Balance Sheets

Life insurance industry
As a result, the disproportionate share is high State Life Insurance Corporation (SLIC). SLIC alone accounted for 74.0% of the total assets in CY01 that dropped to 70.5% in CY03. Likewise, the non-life insurance Industry dominated by government ownership Insurance company, ie National Insurance Company with a share of total assets In CY01 it was down 9.3 to 10.6% the reason for the decrease in CY03.

Part of public non-life insurance companies

Due to the privatization process of the service provider, the contribution to public life is low. However, the insurance company is mainly due to the increase in shares of private domestic companies. Gross GDP assets. Also, the proportion of the insurance industry increased from 2.6% in CY01 to 3.0% in CY03. If State life insurance assets excluded, However, the GDP ratio goes up 0.7% in CY01 and 0.9% in CY03. Looking at the smaller proportions, this Table 5.3 shows that there is a close one. Monopoly structure in the life insurance industry. Also, it’s important to note that both publicly owned Insurance service providers were later forme in the national taxation period.

5.2 Non-life insurance industry overview

However, several companies offering non-life insurance products, Also, health insurance CY00 dropped from 58 to 49 in CY03. Of the above, there were 7 non-life insurance companies Refrain from writing to new insurance businesses during CY03 due to a reduction in payment. Also, the number of foreign non-life insurance companies has decreased from 4 to 4.

CY03 to CY03

With the existence of a state-owned insurance company, Also, private home insurance companies offer
different sets of insurance policies.

PT insurance policies cover the maximum assigned risk

However, insurance policies can be renewed one year and later. With the implementation of financial reforms and changes. In the structure of insurance companies, assets of non-life insurance companies increasing. At an average annual rate of 18.6%, however, growth in CY03 accelerated to 23.4

As shown in Table 5.4 percent over CY02.

Along with the growth of assets,

However, significant growth in the non-life market gathering Investment stocks, which are also an important component of assets owned by insurance companies. After that, investment is usually made in government securities, corporate debt market instruments.

As a TFC and stock exchange. Investment testimony increased 36.2 during the CY03 after testimony.
This decrease in CY02 and CY01 decreased by 11.5 and 3.5% in the last two years. This decline in investment stocks, respectively, was due to meeting and taking advantage of interest rate risk. However, Capital gains Since the main business of an insurance company are to reduce and hedge risk contrary to claims, income earned by investing a premium amount in different investment options.

An insurance policy is a liability between insurance and insurer and is a legal document that describes it.
In cases where proper care is taken by the insurer, the claim amount will have to be paid to the insurer.
Avoid the damage done.

Table 5.4: Non-life insurance companies Business in Pakistan

  • million Rupees CY00 CY01 CY02 CY03
  • Paid-up capital 2,947 5,005 5,477 5,965
  • Reserves and Retained earnings 6,980 3,330 4,504 9,262
  • Investments 12,548 12,114 10,720 14,605
  • Gross Premium 11,713 12,643 15,221 19,571
  • Net Premium 8,038 7,835 8,810 9,740
  • Net Claims incurred 3,965 5,088 4,949 5,266
  • Management expenses 2,156 2,098 2237 2583
  • A Net Profit after tax 1,727 1,514 2,731 2,642
  • Total Assets 22,362 26,534 30,207 37,266

Source: Balance Sheets of Non-Life Insurance Companies and the Insurance Association of Pakistan Year Book. Also, the general principles of the possibility of insurance Different claims are lower at the same time, Usually, return on investment covers the cost Company claims and other expenses depending on the amount of insurance premium.

The nature of the risk factors associated with it Insurance policy gross premium and Pure Premium of the Insurance Industry Show An trend Evaluation period. So, the trend Indication of insurance penetration development In the economy as discussed in Section 5.1. 5.2.1 Creating the Non-Life Insurance Industry. The number of foreign non-life insurance companies increased from four to three during CY03. However, the main reasons for these companies are losses. In addition, losses to foreigners Companies turned to mergers with domestic companies. Table 5.5, highlights the distribution.

Small Insurance Companies Play an important Role in the Financial System
Figure 5.2 of Capitalization of Non-life Insurance

Some macro indicators between private, foreign and state-owned insurance companies. The proportion shows that the share of private domestic non-life insurance companies rising compared to CY01.

CY03. The share of private domestic companies in CY01 was 54.9% of the total assets of non-life insurance companies, which increased to 55.5% in CY02, which increased to 58.2%.
In CY03.

Table 5.5: Composition of Non-Life Insurance Investments and Assets

Small Insurance Composition of Non-Life Insurance Investments and Assets
Small Insurance Composition of Non-Life Insurance Investments and Assets

Gross Premium, the underwriting premium that is to be paid by the life insurance companies to get started. Insurance contract. Net premium is the total premium offered for uninsured risk less reinsurance.


In Conclusion of Small Insurance Companies Play an important Role

First of all, thanks for visiting the article above all Small Insurance Companies Play an important role in the financial system. Because small insurance companies play an important role in the financial system by providing compensation in each country. Small Insurance Companies not only Play an important role in the financial system but also provide insurance awareness to the people.

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