Pakistan Insurance Industry Analysis 2012

Includes 3 FREE quarterly updates

As is the case in previous years, it is very easy to identify points of weakness in Pakistan’s insurance
sector. Non-life penetration and life density – our key metrics – are at very low levels. Because of
declining motor premiums, non-life penetration has been falling. The largest companies in each of the
main segments are public sector entities that are manifestly less dynamic than their private sector rivals.
Over 90% of the population does not use life insurance. Only four multi-national insurers – MetLife
Alico (in life), Chartis (in non-life), Allianz (in health insurance) and Hollard (in life) consider it
desirable to maintain a presence. Most of the non-life insurers are tiny companies with low retention
ratios and low pricing power. None of the largest indigenous companies have scale in an international
context. Takaful contributions are minimal – despite being the country with the world’s second- or thirdlargest
Muslim population.

Nevertheless, Pakistan, like Kenya (the country with which BMI considers Pakistan to be most
comparable), has a national insurance sector where resilience and innovation are very key concepts. In
total contrast to other countries with very challenging political, security and economic environments, the
‘big three’ indigenous groups – EFU, Jubilee and (if to a lesser extent) Adamjee – have worked to
develop a vibrant and significant life insurance segment. State Life Insurance Corporation (SLIC), the
state-owned titan that still accounts for over 60% of life premiums has done its part too. The big three’s
general insurance operations are characterised by broad product portfolios, multi-channel distribution and

innovation. National Insurance Company Limited (NICL) is playing an important role in the development
of microinsurance, which the government sees as a key priority – and one that is more important than the
promotion of Takaful. Interestingly, both Kenya and Pakistan are countries in which the Aga Khan Fund
for Economic Development (AKFED) and affiliated institutions have an involvement in insurance
through the Jubilee companies.
The latest results that have been published by the listed companies in relation to H112 confirm that
growth continues apace – particularly in the life segment. In spite of the low retention ratios, Pakistan’s
insurers appear not to have suffered from the general rise in rates and prices in the global reinsurance
market through the first half of 2012 – following the massive catastrophes last year.