Interdaction

Pakistan Insurance – The EFU Insurance Group

JS Group is the second-largest shareholder in the EFU Insurance Group, Pakistan’s largest insurance group.

EFU Insurance Group was established in 1932 as the Eastern Federal Union Insurance Company and grew to become the largest life assurance company in Asia (ex-Japan) from 1961.  In 1972, the life assurance business was nationalised but EFU continued as a general insurance company.  Today, it is Pakistan’s second-largest general insurer.

In 1992, the private sector was again permitted to carry out life assurance and EFU Life Assurance was launched by EFU General in conjunction with the JS Group.  Today, this company is the largest private sector life assurance company in Pakistan with a sales force of over 1,500 people and over 50% share of the life insurance business.

EFU General Insurance

EFU General is engaged in the general insurance business comprising of fire, marine, motor and engineering insurance.

The shares of the company are quoted on the Karachi and Lahore Stock Exchanges. The principal place of business is located at EFU House-Karachi with over 72 branches throughout the country.

EFU Insurance Group is one of the few Pakistani insurance organisations run entirely by professional management and with a highly-motivated field force. EFU General has obtained Insurer Financial Strength Rating of ‘AA Stable Outlook’ by the rating agency JCR-VIS.

A unique feature of EFU Insurance Group is its voluntary review mechanism by professionals of international repute. The independent reviews by these professionals enable the company to keep abreast of international changes in the industry as well as ensure that management adopts the best international practices.

Another pillar of EFU Insurance Group’s strength is its very close and long-term (over 50 years) relationship with its main reinsurer, ‘Munich Re’, one of the largest reinsurance companies in the world.

EFU Life

In 1992, the Government of Pakistan reopened life insurance business to the private sector organizations and EFU Life Assurance Ltd was incorporated as the first private sector life insurance company. In early 1993, EFU Life commenced writing group life insurance business and, by March 1994, the company began writing  individual life business.

The company has a growing network of 72 branches throughout the country with employee strength of over 1,600 in its sales force and around 150 at its main offices in Karachi and Lahore. The company employs 5 full-time actuaries and also engages one of the leading actuarial firms in the country.

EFU Life is the first life insurance company in Pakistan to be awarded the ISO 9001:2000 certification. Today, EFU Life continues to be the largest private sector life insurance company in Pakistan. EFU Life was the pioneer in introducing the following products and features in Pakistan:

Unit-linked products
Critical illness products
Education planning product
Inflation protection benefit
Tax qualified pension plans
Extended critical illness product (covering 379 medical conditions)

Allianz-EFU Health Insurance

In 2000, EFU Insurance Group formed a joint venture with Allianz AG to incorporate Allianz-EFU Health Insurance, Pakistan’s only specialised health insurer. Allianz EFU Health is a joint venture between the leading insurer in the world, Allianz Group, and the most experienced local insurer, EFU Insurance Group. It was the first company in Pakistan to offer health insurance to individuals and families, and companies with as few as five employees. To ensure quality, Allianz-EFU is implementing an Integrated HealthCare delivery system.

 

What is insurence

Insurance is a risk transfer mechanism. It’s a method of shifting the responsibility for losses to specialists (insurance companies) who handle the risk by spreading it over a large number of people or firms. 

A system of protection against loss in which a number of individuals agree to pay certain sums of money, called premiums, to create a pool of money which will use the contribution of these individual to pay the losses of the few caused by events such as fire, accident, illness, or death.

History:
(courtesy: Mr. M. A. Chishti- Late)

History is important for the study of any subject. It is all the more essential in insurance because the essentials of the insurance idea are written in the pages of history. Fortunately, insurance has a rich and interesting history. Its history reflects several periods of human civilization. Its beginning was simple and development gradual. As the trade and industry developed, the need of insurance was also felt and the institution of insurance was invented, as the adage goes: “Necessity is the mother of invention”.

Contracts, known as bottomry, were used by money lenders to shift the burden of risk from owners of ships or cargoes to themselves. The loan was cancelled, if the ship or cargo was lost during a voyage. The change for the bottomry loan, if the voyage was successful, was very high because it included the amount of interes and cost of risk. The contract of bottomry loan in fact sowed the seed of the insurance idea.

According to extant records, loans in the form of bottomry were known to the merchants of Babylon during 4000-3000 B.C. It is also recorded that bottomry was practiced by the Hindus in 6000 B.C. Even in ancient Europe, the Greeks and the Romans also adopted this commercial practice. Therefore, the origin of insurance is very old and man, somehow or the other, has continued his earnest efforts to tide over all hurdles that came in his way to make his life easy and comfortable.

Although marine insurance originated in Italy, its practice gradually spread to other trade centres of Europe. In Bruges there is a record of a court judgement in an insurance dispute in 1377 A.D., while in 1435 A.D. an ordinance regulating marine insurance was issued in Barcelona. Similarly, an ordinance of Florence, dated 1523 A.D. codifies the practice of Italian insurance. By this time, with the waning importance of Mediterranean trade after the discovery of America, Antwerp became a leading insurance market, yielding place to London in later days.

Marine insurance is the first category of insurance business that was developed. In England, the earliest records of marine insurance come to us from the court of Admirality. In due course of time, insurance became international in its character. In 1563 A.D., an Antwerp merchant insured three ships on a voyage from Havre to Central America. This policy, in French, was shared by thirty seven British underwriters. This policy, in French, was shared by thirty seven British underwriters. This participation of the English underwriters confirms the rapid insurance growth in London. In 1570 A.D., London’s own bourse which was erected by Sir Thomas Gresham, was named the Royal Exchange by Queen Elizabeth I, of England.

Insurance:

Until 1720 A.D., marine insurance was entirely in the hands of individual underwriters, whose main business was trade and commerce and insurance was a side-line. These individuals were either available in the Royal Exchange or in one of the nearby coffee houses, of which Edward Lloyd’s, who originally started his business in Tower Street in the City of London, moved later on to Lombard Street. Very soon, Lombard Street became the big centre of marine insurance. Lloyd’s Coffee House was the centre for sales of ships and their cargoes. In this Coffee House, businessmen would come for coffee and sit down to talk about their business and would exchange information about the movements of ships. Lloyds thought why not start a short newsletter so that the people would have the latest information about the movements of vessels. So, he issued the newsletter. When the demand for the newsletter increased, he thought why not open a common fund in which all businessmen would participate and deposit monies according to their resources. This was the beginning of insurance. Edward Lloyds died in 1713 A.D. but the coffee house was carried on by his family. In this coffee-house, the individual insurers, or underwriters concerned with marine insurance, used to congregate to do insurance business. Gradually, a corporate spirit was developed among them. In 1772, the underwriters set up the committee of Lloyd’s to govern their affairs. In 1733, the proprietor of the above coffee-house began the publication of Lloyd’s List, which gave the movements of ships and other matters of trading interest. Lloyd’s List is still published as a daily newspaper from London.

In 1871, Lloyd’s Act was passed to incorporate the Society of Lloyd’s or the Corporation of Lloyd’s as it is now called.

The students of insurance should keep this fact in mind that Lloyd’s does not itself grant insurance as insurance companies do. The policyholder who has a Lloyd’s policy is insured “at Lloyd’s” not with Lloyd’s. “i.e. Lloyd’s is like a vast market-place of insurance where individual underwriters sit to accept risks of insurance. The liability to meet claims under the policy rests solely with those underwriters who are committed by any one policy, each for his own share of the risk.

An insurance broker must be accredited to Lloyd’s before he can place business there and inscribe on his note-paper after his address the world “and at Lloyd’s”. Firms of Lloyd’s brokers may be either one-man business, partnerships, or limited companies, and at least one of the partners or directors is required to be either a member i.e. an underwriting member of, or an annual subscriber to, Lloyd’s. The firm must make a substantial deposit with Lloyd’s and it is held as security for fulfiloment of the firm’s obligations to underwriters. At Lloyd’s the broker is treated in law as the agent of the proposer, but not of the underwriter.

The place where Edward Lloyd’s Coffee house was situated, was taken over by the government as a national asset and today one reads these words on the brass plaque “Lloyd’s Coffee House 1691-1785”.

Lloyd’s is not now an insurance company but an insurance corporation and it is said that it is the biggest insurance organization in the world and participates in the business of every insurance company of every country. In other words, where there is insurance, there is Lloyd’s.

This organization after its establishment in 1688 made such rapid strides that, after about a century, when in 1799 a ship laden with gold and silver bullion sank, the Lloyd’s paid up its insured value of a million pound sterling. The biggest marine loss suffered by this organization was in 1975 when, due to the sinking of 802,502 tonnes of cargo and ship, it paid 122 million pounds sterling within a year.

The Earthquake fire in San Francisco in 1906 resulted in the payment by Lloyd’s of 25 million pounds.

In 1970, one aeroplane was hijacked and destroyed by fire. Lloyd’s paid twelve and a half million pounds.

In 1974, a Turkish Airlines DC-10 crashed near Paris, and Lloyd’s paid its full insured value of one hundred million pounds.

After Lloyd’s, hundreds of insurance companies have come into existence many of whom have worldwide reputation and standing.

After the discovery of marine insurance other classes of insurance such as fire, life, motor, accident etc. appeared in the market. When the Great Fire of London occurred in 1666 A.D., no fire insurance existed. In the same way, life insurance made its debut in 1553, when the life of one William Gibbons was insured by sixteen individual underwriters in London.

How other classes of insurance came into existence would be elaborated in other chapters of this book, when each class of insurance would be dealt with.

Importance of Insurance?(courtesy: Mr. M. A. Chishti-Late)

Economic security is the most sought after assurance of well being in the modern age of technology. An effective instrument of ensuring security is Insurance-may it be the security of the dependants of the bread-winner or it may be the security of goods lost by the natural, accidental or circumstantial mishaps.

As man developed his arsenal or weaponry for the protection of his body, he also developed means of economic and financial protection. It emerged in the shape of life and non-life insurance.

The subject of life insurance is the human being and the object is to provide financial security, to the dependants of the deceased, while the subject of non-life or general insurance encompasses everything from a pin to a jumbo jet, all goods and property – with the object of putting a person back in the same financial position of the loss as he was at the occurrence of the loss. It would, thus; be seen that insurance is the most effective equipment to protect oneself against the horrendous effects of personal or property loss due to disastrous events.

The desire of all people has always been, and will always remain, to live a cleaner, healthier, comfortable and easy life. To fulfil this basic need of human beings, enterprises produce and provide goods and services and, in the process, make innovations and inventions. When you make innovations and inventions, you take big risks. An onerous responsibility devolves on the shoulders of innovators and inventors and, while doing this, they play with the lives of people. A small error or lapse can cause numerous side effects which may result in the death or disability of a large number. The notorious case of Union Carbide, commonly known as Bhopal tragedy, in India occurred in 1984, when poisonous gas escaped from the plant, killing 3,300 people and injuring 200,000. The Supreme Court of India settled this claim for an amount of US$470 million.

These types of instances speak of the importance of insurance. Had insurance not been at the back of all these innovators, the world would never have progressed in all walks of our lives. Once this insecurity factor was taken care of, the entrepreneur started looking for new and more sophisticated machines, robots and gadgets. Atomic energy was harnessed for the progress of man. Booster rockets put the man on the moon. Computers enabled man to acquire answers to the most complicated problems in minutes for which an army of experts took days to solve. Deep seas were exploited and bowels of the earth were torn apart fearlessly to extract wealth for the progress of man. Concords and Jumbo jets were developed and the world shrank to a small size. Medical sciences made tremendous advances and most of the hydraheaded diseases, dreaded by man from times immemorial, have been eradicated, expanding man’s life expectancy. All this happened because of insurance support.

In all spheres of a man’s life, insurance is there to help and assist him, be it motor insurance, or fire or life or any other class of insurance. The helping hand of insurance is always there to protect and provide him financial security.

Insurance is also an effective tool for mobilization of savings which helps both in the control of inflation and in capital formation for the development of the country. Thus, it plays a pivotal role in the economic progress of a country.

In peace time, the coffers of insurance are open to trade and industry which eventually contributes towards the progress of man. Insurance is a great source of revenue to the national exchequer. In short, “Insurance is among the most leading forces contributing towards economic, social and technological progress of man”. In other words, progress of insurance is linked with the progress of man.

During war, insurance plays its leading role as no other economic activity can. Life insurance finances war efforts, marine insurance provides funds for new ships whenever these vessels are sunk, while fire insurance makes goods the losses sustained due to fire as a result of bombing.

Without insurance cover all industrial, economic and social activity of the world will come to a grinding halt. Major trade and commercial contracts will be abandoned, aeroplanes grounded, and vehicular traffic withdrawn from roads. There will be an utter chaos. This shows that insurance is a synonym of human progress, prosperity and civilization.

Insurance In Pakistan

Feeling comfortable in the knowledge that if something was to happen to a family member their medical costs will be taken care of, is important to us all. Our expert consultants can advise on the most suitable level of coverage for families, individuals, groups, travelers, andteachers expatriate health insurance.

Expatriate Health Insurance Pakistan

Pacific Prime is an expatriate insurance broker specialising in providing overseas medical insurance for Pakistan nationals living, working or holidaying abroad. If you are a non Pakistan national and moving to Pakistan we can also provide plans that meet your specific requirements.

The policies that we can provide are guaranteed renewable for life and globally portable, so even if you should relocate away from the country your plan will continue to cover you. With a number of extra benefits includingmaternity coverage, emergency evacuation and repatriation, dental treatment, out-patient consultations, alternative medicines, complimentary therapies, and specialist consultations, you can be assured that an international health insurance Pakistan plan will give you the coverage that you need. For more information about the products and services that we can offer, or to receive a free quote, please contact us today.

Professional Service you can trust

Pacific Prime Insurance will be with you for the duration of your policy. We offer additional customer services that include claims advice, emergency contact numbers and medical advice lines. We also maintain a comprehensive list of Pakistan hospitals/doctors. Most of our clients are expatriates so we maintain a list of Embassies in Pakistan.

As a leading broker of medical insurance in Pakistan we keep up on the latest insurance trends and Pakistan Insurance News.

We can offer expatriates in Pakistan dedicated international health insurance plans that will provide comprehensive coverage in the East and around the world. Plans that we can offer will usually have a number of benefits that a policyholder is able to tailor to suit their specific requirements. With coverage options including out-patient, dental,maternity, and emergency evacuation, you will be assured of receiving the highest levels of quality treatment anywhere in the world.

Pakistan Travel Tips

It can be difficult to adjust to a new country; it is for this reason that we have provided details on the various local laws and customs that foreign nationals are expected to follow. We have also provided some general travel information so that you know what to expect when you arrive in the country. Please be advised that the following information is liable to change without notice and that you should obtain up to date advice from a travel expert or your government before departing your home country.

Due to the ongoing conflict in Afghanistan there is a high threat of terrorism against foreign nationals in Pakistan. Travelers should avoid large groups and gatherings, and take care not to get involved in any kind of social protest.

While resident in, or traveling through Pakistan, you should remain alert for any government announcements pertaining to civil unrest or terrorist acts and follow official directions accordingly.

There is a high incidence of crime in Pakistan, especially in the major cities of Islamabad and Karachi. The most common type of crimes against foreign nationals include cases of petty theft involving passports and wallets, armed car robbery, kidnappings, and murders. Foreign nationals should be aware of their potential risk as political statements while in the country.

Pakistan is a predominately Muslim country. As such many of the local laws and customs are based on the Muslim faith. Visitors and foreign nationals are expected to dress modestly and respect all Muslim customs and behaviors, especially during the holy month of Ramadan.

Pork products and Alcohol are not allowed to be imported to Pakistan unless previously approved by the Pakistani government. Homosexuality and Co-habitation by unmarried couples are illegal. These offences can be punished with long term prison terms.
All drugs are illegal in Pakistan. Even possessing small amounts of a narcotic substance can lead to severe penalties. It is important that you do not become involved with drugs during your stay in the country.

For males, if you or your father were born in Pakistan, even if you do not hold a Pakistani passport, or consider yourself to be a Pakistani national, you may be considered a "Pakistani" by the local authorities. This can mean that you are liable for military service and that the full range of local laws are applicable in your specific case. Please consult your government before traveling to Pakistan if this is the case in your situation.

Foreign nationals and visitors to Pakistan are advised not to take pictures of military instillations, airports, or any "sensitive" infrastructure (including bridges, dams, or train stations). In the past visitors to Pakistan have been accused of spying for taking photographs of these types of places. If you wish to take a picture of a ¡§sensitive¡¨ area you should first obtain permission from an official. Try not to take photographs in Pakistan's outlying border areas.

Most foreign nationals require a Visa to enter Pakistan. Visa's are only issued on passports that have more than 6 months currency when entering the country. Journalist visas will usually have additional restrictions to a tourist visa, you should fully understand your travel limitations in these cases. It is important to note that Visa violations are treated as a serious criminal offence.

For more information about a quality international health insurance plan, to receive a free comprehensive quote, or to speak to one of our expert advisers, please click here.

For more information about traveling to Pakistan, the international health insurance plans that we can provide there, or to receive a free quote, please contact us today.

Private Equity

Driven by the government’s commitment to economic liberalisation, Pakistan is forecast to continue growing at around 7% per annum, exceeding the Asian average.  With one of the world’s most successful privatisation programmes, a pivotal geographic position in a fast-growing region and sustainable comparative cost advantages in key sectors, Pakistan offers many exciting investment opportunities to sophisticated private equity investors.

JS Group has a successful, long term track record of unearthing and successfully developing investment opportunities in Pakistan and has led several successful private equity investments. In 2006, JS Group launched JS Private Equity Fund I; Pakistan’s first private equity fund targeting high-quality expansion capital and buyout investment opportunities within sector-leading companies in Pakistan.

The Fund - JSPE Fund I

• Pakistan’s first private equity fund, focusing on expansion capital and buyout opportunities
• Tax efficient, structured as a Mauritian Limited Life Company
• Target size US$200 million, US$70 million first close completed
• First close investors include International Finance Corporation, SAMBA Financial Group, Global Investment House and DCD Group
• Sponsored by JS Group, investing US$20 million, with US$1 million from the Fund Partners
• Target returns 30-40% net of fees and expenses

JS Group – The Fund Sponsor

• One of Pakistan’s leading financial services groups
  • AA+ PACRA rated flagship investment company
  • Largest private sector asset management company
  • Best-capitalised, award winning equity brokerage business
  • Largest fixed income and currency brokerage businesses
  • Second largest shareholder in largest general and life insurer
  • Conventional and separate Islamic banking businesses
• A history of successful international partnerships
  • Allianz (insurance)
  • International Finance Corporation (asset management)
  • Experian (credit bureau)
  • Bear Stearns (investment banking)
• Pakistan’s largest and most successful private equity investor
  • 24 private equity investments over a 10+ year horizon
  • A partner team that has worked together for over 10 years and has a depth of experience across the private equity life cycle
  • A delivered US$ 10-year IRR of 55% on Pakistan private equity

Key reasons to invest in Pakistan

• Strong macroeconomic performance – 8.4% GDP growth in 2004/05, 6.6% in 2005/06 and 6-8% medium-term growth forecast by Asian Development and World Banks
• Improved credit position (S&P upgrade to B+, Moody’s upgrade to B2) with positive outlook
• Liberalisation, deregulation and privatisation in key economic sectors
• Pakistan’s strategically geographic position as a trading and energy bridge for Asia and the Middle East
• Comparative cost advantage and reduction in trade barriers
• Limited private equity competition due to local regulatory framework
• A well developed legal, reporting and corporate governance framework

Investment Strategy

• Control or significant minority stakes with strong contractual rights
• Established companies, privately held or PIPE investments
• An attractive pipeline of investments already in place
• Expansion capital: comparative cost advantage, pent up domestic demand, deregulating sectors
• Buyout capital: sector consolidations, family owned companies facing succession issues, privatised company spin offs, underperforming conglomerates
• Greenfield: very selectively for infrastructure bottlenecks

Laws/Rules

Memorandum & Articles of Association of IAP
Insurance Ordinance 2000
Insurance Rules 2002

• amendments to the Insurance Rules 2002 (Mar 05, 2009)
  

SECP Insurance Rules 2002
IAP Code of Conduct
Companies Ordinance 1984
Takaful Rules 2005
Income Tax Ordinance 2001
Income Tax Rules 2002
Trade Organizations Ordinance 2007
Trade Organizations Rules 2007
Ministry of Foreign Pakistan
Law & Justice Commission of Pakistan