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  • Pakistan’s total assets of the industry up 14.5 per cent, standing at Rs 2.421 trillion

The insurance sector is made up of companies that offer risk management in the form of insurance contracts. The basic concept of insurance is that one party, the insurer, will guarantee payment for an uncertain future event. Meanwhile, another party, the insured or the policyholder, pays a smaller premium to the insurer in exchange for that protection on that uncertain future occurrence, according to researchers.

During 2023, total global insurance market premiums increased by 3.4 per cent in real terms. The Non-life sector posted 2.6 per cent growth, driven through rate hardening in commercial lines in advanced markets.

Top 10 Ranking By Total Premium Volume
Rank Country Total premium, $mn % change
1 US 2 718 699 8.1
2 China 696 128 6.1
3 Japan 403 592 –2.6
4 UK 399 142 16.7
5 France 296 380 24.0
6 Germany 275 779 5.9
7 South Korea 193 008 1.5
8 Italy 192 481 11.5
9 Canada 161 289 15.8
10 India 126 974 13.5

According Swiss Re Institute Report, Life premiums in China contracted by 2.6 per cent because of weakness in life savings business caused by a further fall in critical illness business. However in China, the largest emerging market, non-life premium volumes contracted by 0.7 per cent as the de-tariffication of motor insurance sparked fierce competition and rate reductions.

In the world, the US remains the largest insurance market, with total premiums (non-life and life) of USD 2.8 trillion. Next are Japan and China.

The three markets together accounted for approximately 56 per cent of the global premiums, slightly less than in 2022 (57 per cent).

The Japan and US insurance market together lost almost 1 per cent market share, the ground lost taken up by the France and UK.

With the war in Ukraine weighing on economic growth in Europe in particular, experts expect insurance industry growth in emerging markets will outpace that in the advanced markets in 2023, with emerging Asia in the lead. Swiss Re Institute expect that in the world India will be one of the fastest growing markets over the coming decade.

India is one of the fastest growing insurance markets globally. In terms of total premium volumes, in 2023 it was the 10th largest globally, with an estimated market share of 1.9 per cent, and the second largest of all emerging markets. At this rate, statistics also showed that India will be the 6th largest insurance market in the world by 2032, ahead of Germany, Canada, Italy and South Korea.

In the developing countries like Pakistan, the country’s insurance industry is in a dismal state both in terms of providing any proper protection and securing a sizable premium base. To date insurance penetration in Pakistan is even less than 1 per cent of GDP. The main reason behind this is that industry has continually been in a rut of old and archaic practices, and those who are controlling its affairs have a vested interest.

In the early days of Pakistan insurance industry, Pakistan was dominated by foreign insurance companies. There was some good order in the working and because of that companies were considered well reputed and enjoyed public’s confidence. But, as the new class of industrialists emerged which was established chiefly on concessions obtained from the Government of Pakistan it went into insurance business with a purpose not to let go of premium paid by their allied businesses to other insurers. So they just created another pocket to keep the money they used to spend on premiums.

According to the statistics released by the Securities and Exchange Commission of Pakistan (SECP), the total assets of the insurance industry in 2022 grew by 14.5 per cent, standing Rs 2.421 trillion from Rs2.11 trillion. The life insurance sector accounts for 68 per cent of gross premiums written in the industry, while the non-life sector accounts for 32 per cent. The gross premium grew by 28 per cent from Rs 432 billion in 2021 to Rs553 billion.

Claims paid grew by 26 per cent, with Rs 276 billion paid by life insurance companies and Rs 69 billion by non-life insurance companies, compared to Rs 218 billion in 2021.

During 2022, the insurance industry has paid taxes/duties of Rs34.3 billion to the exchequer counting income tax of Rs11.7 billion. The data of tax payments by the insurance sector for 2022 released by SECP released that the sales tax payment stood at Rs7.5 billion during this period.

Out of the total contribution of taxes etc by the insurance sector, the payment of the federal excise duty (FED) was Rs9.7 billion during 2022, which is higher by Rs2.2 billion, as against to the sales tax payment of Rs 7.5 billion during 2022. Under the head of stamp duty during 2022, the entire insurance industry has paid Rs3.3 billion. During this period, other contributions made by the industry amounted to Rs2.1 billion. The statistics revealed that the total assets of the insurance industry amounted to Rs2,421 billion during 2022 as against to Rs2,114 billion in 2021. The gross premium of the insurance sector was Rs 553 billion during the period under review as compared to Rs432 billion in 2021. The claims paid by the industry amounted to Rs276 billion in 2022 as against to Rs218 billion paid in 2021, reflecting an increase of Rs 58 billion. During the period under review total polices of worth Rs 10.1 million have been sold by the insurance sector. The premium in the categories of accident, health and critical illness is 30 per cent of the total premium. The premium from digital channels constitutes 0.5 per cent of total premium.