Pakistan instead of being the maritime nation unable to effectively exploit the sea and its resources. Decades of neglect have hampered the development of the maritime sector, which in turn has hurt both economic and blue growth along with the national security of the country. While seaborne trade is the backbone of Pakistan’s economy, the domestic shipping and shipbuilding industries are in disarray. The exploitation of offshore natural resources is restricted to coastal fisheries. Despite its animosity with neighboring India, Pakistan has until recently relied on two co-located ports at Karachi and now partially on Gwadar which is expected to be in full swing in upcoming future. In the world of Globalization where economies across the globe are striving hard to minimize the risk of trading; insurance sector appears as one of the important contributor in growth and development of countries.
In Pakistan, the insurance sector was regulated by the federal ministry of commerce till the end of 2000, but this authority to regulate the insurance sector has shifted to the Security and Exchange Commission of Pakistan (SECP) in 2001 to intensify this sector and uphold an adequate governing environment for the prosperity of insurance sector in Pakistan. As per world Trade Organization In Pakistan, 12 areas covering 161subsectors of the services including the insurance sectorand according to state bank of Pakistan insurance sector contributes 0.25 in export of G/S and 0.34 in Import of G/S between 2008-09 and 0.17 in export of G/S and 0.39 in import of G/S in 2008-09 (SBP, 2010) while the financial sector that includes bulging insurance as well also contributes in small employment generation. Since 1972, Government of Pakistan was struggling to upgrade the insurance sector via Nationalization but the origins of marine/Sea/Blue insurance is one of the most complicated and controversial aspect in the history of business institutions but after the arrival of CPEC; Pakistan is making effort to build its blue economy as an alternate to traditional economy which requires diversified and harmonized blue growth focusing each and every aspect of blue economy so, there is a dire need to incorporate best insurance practices backed by insurance policy which is necessary for any maritime nation to be competitive. As we all know that the real potential of Gwadar port is exploited via CPEC which actually aimed to raise the transit trades and avoid the additional burden on two ports of Karachi but the economic activity of CPEC will open the new doors for the insurance sector in Pakistan and all the projects will have to be widely insured during both the construction phase and the operational phase even though the Pakistan economy’s infrastructure was not supposed to be insured previously but the Chinese are expected to insure each project as Karachi has already an example of the KPT flyover which was insured by a local insurance company of Pakistan and the project was constructed by the Chinese. As CPEC is one of the largest project facilitating trade of many countries therefore, it is in national and international interest of many nations, therefore; it is necessary for Pakistan and China to make it risk-free and secured not only to overcome the unexpected situations in consideration of the premiums, ultimately invested in economic growth in turn but risk minimization will also improve the trust of investors in the project. As we are moving slowly towards the completion of the project so, Pakistan is expecting inclusive growth in industries with huge potential for the Insurance sector due to propagation of business activities under CPEC so, the role of this sector is eminent to attract the foreign investment in Pakistan through risk minimization.
In 2016, the insurance sector in Pakistan accelerate its pace of growth and gains momentum which is supposed to be retained in future but it is important for the authorities to regulate and work for the efficiency that enhance awareness to ensure the significant future growth of insurance business in Pakistan. According to the annual gross written premium the insurance sector in Pakistan is grew at an annual average compound growth rate of 13% from 2011-2016 worth PKS 85 billion excluding reinsurance and CPEC is the main factor behind this progress. Insurance companies in Pakistan should be braced to shaft the opportunities and confrontations supposed to be the part of CPEC. The future of insurance sector is immensely promising as enormous foreign funds are coming to flow in the Pakistan economy as addition into the capital stock. There is need to be conscious regarding the insurance sector low (0.2% of the total population) penetration observed into Pakistan economy and the size of insurance industry is less than 1% of GDP because only the rich and middle class is targeted while the micro-insurance sector is conveniently ignored.
It is also observed that the CPEC not only accelerates the growth of Pakistan economy in right direction, but also generating various facets to embark the development in Pakistan, therefore; it is indeed important that the government required to approach the Chinese government and propose the tasks as Chinese insurers are supposed to establish subsidiaries in Pakistan to endeavor with the collaboration with local insurance companies in order to co-insure the CPEC and related projects. This would accommodate the Chinese investors locally (SBP, Annual Financial Stability Review 2016). The CPEC will also intensify the transport insurance in Pakistan in the area of marine and fire insurance. Large number of trucks are being manufactured and imported to meet the operational requirement of the ports so, it is recommended to set insurance policy, through the regulation of micro-insurance sector so that poor can afford the proper insurance policies in order to cover the risk and uncertainty attached the businesses. The non-life insurance premium portfolio mix of 2015 observed claims ration of insurance companies comprised of 345, 38%, 47% and 45% in the fire, marine, motor and others respectively, and the penetration of non-life insurance was consistent from 2011- 2015 which was 0.3 % (Source: financials of 30 companies). Government is confronting many challenges thatare still necessary to facilitate the projects under CPEC in order to obtain the fruits of this economic corridor and there is no doubt in the fact that this corridor will change the entire dynamics of insurance sector in Pakistan as it adds the business into the insurance industry of Pakistan including the cross boarder optical fiber costing US$44m, Aviation/Gwadar Airport US$212m, Roads/Motorways/Expansions US$9.2bn, Ports and Shipping US$ 300m and Railways US$43m so, it is concluded that insurance sector have the capacity to contribute the economy through its expedite decisive performance because Prolific investment takes place only in economies where there is financial cohesion and surveillance at personal and national level and the protection against risks leads to overcome the financial misfortune, induce savings and courageous investment. This would strengthen the national image of any country so, it is important for Pakistan to complete all the projects under CPEC uninterruptedly and smoothly to ensure economic prosperity and Blue Growth keeping in mind the fact that the total penetration ratio by insurance nexus has an immense contribution to the GDP growth which in turn increase the level of income all the financial sector in Pakistan so, insurance companies should profile their clients according to the economic and demographic characteristics and develop unique products and marketing strategies for each portion along with the healthy penetration for the coverage of uncertainties which not only minimize risk but also encourage investors to invest in Pakistan that translates the economic wellbeing of Pakistan.