ISLAMABAD: To promote implementation of sound principles of risk management in credit and suretyship businesses of insurance companies, Securities and Exchange Commission of Pakistan (SECP) has notified amendments to the Credit and Suretyship (Conduct of Business) Rules, 2018 vide S.R.O. 1010 (I)/2022.
The amendments require insurance companies to develop risk assessment mechanism to evaluate technical and financial strength of the persons on whose behalf the bond/guarantee is being issued.
This is intended to assess the principal obligors’ experience and expertise to carry on the project work, as well as their financial strength.
Furthermore, in order to optimally utilize the local absorption capacity available within the country, and to curtail the outflow of reinsurance cessions abroad, the collateral requirements has been delinked from reinsurance arrangement.
Through these amendments, SECP has also reduced the cash collateral requirement to 10% of the bond value.
Earlier on Friday, the SECP, in a bid to encourage participation of insurance companies in the Exchange Traded Fund (ETF) market, had allowed insurance companies to invest in open-ended mutual funds including ETFs.
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