ADB approves $700 million policy-based loan to reform Pakistan’s insurance sector

ISLAMABAD: The Asian Development Bank (ADB) has approved a $700 million policy-based loan to support reforms aimed at strengthening insurance in Pakistan. The program seeks to expand insurance coverage and reduce protection gaps. It will also help stimulate private sector participation and support sustainable economic growth.

The Insurance Transformation Program will strengthen Pakistan’s financial resilience by deepening insurance markets and expanding financial protection for households, businesses, farmers, and public finances against extreme weather events, disasters, and life-cycle risks. The reforms are expected to reduce financial vulnerabilities, support faster recovery from shocks, and lessen pressure on public finances following disasters and other crises.

“This program supports the transformation of Pakistan’s insurance sector from a legacy, rules-based framework to a modern, risk-based, and market-oriented system,” said ADB Country Director for Pakistan Emma Fan. 

“The reforms will help mobilize patient capital for development, expand financial protection for households and businesses, and support a more competitive, inclusive, and resilient insurance market.”

Pakistan’s financial system remains heavily bank-dominated, while insurance penetration stands at only 0.7% of the gross domestic product (GDP). As a result, many households, businesses, and farmers remain financially exposed to environmental, health, and economic shocks.

The loan will support resilience initiatives and disaster risk financing by expanding inclusive and shock-responsive insurance products, particularly for farmers, women, and vulnerable households. 

In particular, the program will promote insurance solutions tailored to the needs of women and girls through targeted product design, digital access, and sex-disaggregated data. These measures aim to expand insurance coverage through digital distribution systems, satellite-based risk assessment, parametric insurance solutions, and risk-pooling mechanisms, while improving claims settlement and access to insurance services.

Additionally, the program will support the development of capital markets and private pension products by mobilizing long-term savings for infrastructure financing, bond market development, and annuity-based pension systems.