In brief: To combat the negative economic impact of the perception of terrorism within its borders, Pakistan has developed a blueprint for a Terrorism Insurance Pool.
The full story
To provide investors a shield against businesses losses due to potential terrorism attacks in Pakistan, the Securities and Exchange Commission of Pakistan (SECP) is creating a Terrorism Insurance Pool in the country.
The Pool would be available to all businesses interests investing in Pakistan - foreign and domestic - and would provide compensation for losses incurred if terrorism occurs. This, it is hoped, will give renewed confidence in the nation's economy and bring in more investment.
The insurance would be underwritten as an addition to Fire Policy coverage. The SECP issues the following guidelines for the current framework-in-progress for the Terrorism Insurance Pool:
- Policy may require ceding to pool and terrorism rates are pre-determined as service commissions to insurer are agreed upon. Insured interacts with insurer only.
- Pool will have a limit on the coverage provided ($10 million) or still to be decided.
- Pool might be able to issue policy on first loss basis (still to be decided).
- Terrorism policy wording will be standardized in this regards.
- There is also a feeling to exclude certain risk classes from the legislation on Terrorism Insurance Pool (still to be decided).
Summing up
The centralized system will be deliberated this year and would likely go into effect in the third or fourth quarter of 2012.
Photo credits: SECP
