The insurance sector in Pakistan is regulated and governed by the Securities and Exchange Commission of Pakistan (SECP) under a strict licensing and regulatory regime. Establishing an insurance company involves not only incorporating a legal entity but also securing a certificate of registration from SECP under the Insurance Ordinance, 2000. This article provides a comprehensive step-by-step guide to registering an insurance company in Pakistan, covering legal requirements, capital adequacy, compliance, and licensing procedures.

Overview of the Regulatory Framework

The following laws and regulations govern the formation and operation of insurance companies in Pakistan:

• Insurance Ordinance, 2000

• Insurance Rules, 2017

• Insurance Accounting Regulations, 2017

• SECP (Insurance) Licensing Regulations, 2019

• Code of Corporate Governance for Insurers, 2016

• Companies Act, 2017

• Anti-Money Laundering Act, 2010

The SECP is the sole regulatory authority that issues licenses and supervises the operations of all insurance companies in Pakistan, including life, non-life (general), and reinsurance companies.

Types of Insurance Companies in Pakistan

Before initiating the registration process, the promoters must decide the type of insurance company they want to establish. The types include:

1. Life Insurance Company: Offers long-term insurance products including term life, endowment, whole life, and pension plans
2. General Insurance Company: Offers short-term non-life coverage like motor, fire, marine, travel, and health insurance
3. Family Takaful Operator: Provides Shariah-compliant life insurance
4. General Takaful Operator: Provides Shariah-compliant non-life insurance
5. Reinsurance Company: Provides insurance cover to other insurers to manage risk exposure
6. Microinsurance Company: Offers low-premium coverage to low-income segments

Each type of company has its own licensing and capital requirements set by SECP.

Step 1: Form a Public Limited Company

Insurance companies must be incorporated as a Public Limited Company (Unlisted or Listed) under the Companies Act, 2017. SECP does not allow registration of insurance companies as private limited companies.

To incorporate:

• Reserve a company name through SECP’s e-Services Portal

• Submit incorporation forms including:

  • Memorandum and Articles of Association tailored to insurance activities

  • Form 1, Form 21, Form 29

  • CNICs or passports of directors

  • Bank challan for fee payment

• Minimum number of directors: Three

• Minimum number of shareholders: Seven

Once incorporation is complete, the company receives a Certificate of Incorporation and becomes eligible to apply for an insurance license.

Step 2: Fulfill Minimum Paid-Up Capital Requirements

The SECP has set the following minimum paid-up capital thresholds (as of 2025):

The capital must be deposited in a scheduled bank and proof must be submitted to SECP.

Step 3: Submit Application for Insurance License

The next step is to apply to SECP’s Insurance Division for a license under Section 10 of the Insurance Ordinance, 2000. The application must be submitted in the prescribed form along with the following documents:

• Form I: Application for insurer’s registration

• Feasibility Study and Business Plan for at least 5 years

• Bank Certificate of Paid-up Capital

• Profile of Directors and Sponsors including source of funds

• Auditor’s certificate confirming capital subscription

• Proof of Registered Office

• Risk Management Framework and internal controls

• Actuarial opinion (in case of life/family takaful companies)

• Shariah compliance framework (for takaful operators)

Promoters must also submit an undertaking to comply with relevant insurance laws, anti-money laundering rules, and governance codes.

Step 4: SECP’s Review and Due Diligence

Once the application is submitted, the SECP conducts thorough due diligence on:

• Promoters’ financial standing and reputation

• Verification of source of capital

• Board and management qualifications

• Adequacy of reinsurance arrangements

• Market need and feasibility report

The SECP may call for additional documentation, interviews with directors, or seek clarifications.

If satisfied, the SECP will issue a Certificate of Registration as an Insurer.

Step 5: Appointment of Key Officers and Board Formation

The insurance company must appoint key officers before commencing business:

• Principal Officer (must meet SECP’s qualification and experience criteria)

• Appointed Actuary (for life and family takaful operators)

• Compliance Officer and AML Officer

• Head of Internal Audit

• Company Secretary

• Chief Financial Officer (CFO)

The company must ensure that the Board of Directors includes at least two independent directors and complies with the Code of Corporate Governance for Insurers.

Step 6: Open Bank Account and Deposit Statutory Deposit

The company must:

• Open a corporate bank account

• Deposit the Statutory Deposit with the State Bank of Pakistan (SBP) as mandated under Section 29 of the Insurance Ordinance

• The statutory deposit is generally 10% of the paid-up capital and is held as a security

Proof of deposit must be shared with SECP before commencing insurance business.

Step 7: Final Approval to Commence Business

Once all requirements are fulfilled, SECP issues a Certificate to Commence Business, allowing the company to underwrite insurance policies. At this stage, the company must:

• Set up operational offices

• Launch branding and distribution network

• Publish terms & conditions, proposal forms, and policy documents

• Procure insurance management software

• Prepare reinsurance agreements with national and international reinsurers (e.g., Pakistan Reinsurance Company Limited or international reinsurers)

Step 8: Compliance with Ongoing SECP Regulations

After registration, the insurer must follow ongoing regulatory requirements:

• Annual Returns: Submit audited accounts to SECP within four months of year-end

• Quarterly Returns: File unaudited statements every quarter

• Policyholder Protection: Maintain grievance redressal mechanisms

• AML Compliance: File STRs/SARs with FMU

• Solvency Requirements: Maintain statutory solvency margins

• Internal Audit and Risk Management: Conduct regular internal audits

• Board Committees: Establish audit, risk, and HR committees

All insurance companies are subject to on-site inspections, compliance reviews, and financial audits by SECP.

Step 9: Registration with Other Authorities

Depending on business operations, the company may also need to register with:

• FBR for income tax and withholding obligations

• Provincial Revenue Authorities for sales tax on services (if advisory or brokerage services are offered)

• Pakistan Reinsurance Company (PRCL) to arrange local reinsurance

• Pakistan Insurance Institute (PII) for professional training and certifications

• Pakistan Stock Exchange (PSX) if the company plans to go public

Takaful Registration Requirements

Companies wishing to operate as takaful operators must meet additional conditions:

• Submit Shariah Compliance Manual

• Appoint Shariah Board of at least three scholars

• Maintain separate Participants’ Takaful Fund (PTF) and Shareholders Fund

• Submit Shariah Audit Report annually

• Comply with Takaful Rules, 2012 issued by SECP

Hybrid models (Window Takaful Operations) are also allowed for conventional insurers upon approval.

Licensing Timeline and Fees

Note: Additional costs for consultants, actuarial opinions, legal fees, branding, and IT systems should be budgeted separately.

Foreign Insurance Companies Registration

Foreign companies can register in Pakistan through:

1. Wholly-Owned Local Subsidiary
Must meet the same capital and licensing requirements.

2. Branch Office Registration
Process includes:

• Approval from Board of Investment (BOI)

• Registration with SECP under Section 435 of the Companies Act

• Licensing under Insurance Ordinance, 2000

• Statutory deposit in SBP

• Appointment of a resident Principal Officer

Foreign companies must also comply with foreign exchange and repatriation regulations issued by the State Bank of Pakistan.

Key Challenges in Insurance Registration

• High capital and compliance costs

• Long approval timelines

• Regulatory overlaps with SBP, FBR, and provincial authorities

• Shortage of actuarial and Shariah professionals

• Limited awareness and market penetration in rural areas

• Need for robust IT systems to handle reporting and risk

Engaging experienced consultants, legal advisors, and actuarial professionals is crucial for a successful setup.

Growth Potential and Government Incentives

The insurance sector in Pakistan remains underdeveloped with a penetration rate of less than 1%. However, opportunities exist due to:

• Growing middle-class demand for protection products

• Mandatory health insurance in some provinces

• Government’s financial inclusion initiatives

• Digitalization of insurance platforms

• Increased public-private partnerships

• Regulatory support for Takaful and microinsurance

The SECP is also streamlining licensing through its Insurance Regulatory Sandbox and fast-track approval system for digital players.

Conclusion

Registering an insurance company in Pakistan is a regulated, capital-intensive, and detailed process involving incorporation, licensing, compliance, and operational readiness. Whether you’re setting up a life, general, Takaful, or reinsurance company, it is essential to follow SECP’s rigorous procedures and meet capital, documentation, and governance standards. With the right preparation and professional support, entrepreneurs and investors can tap into Pakistan’s growing insurance market and contribute to the country’s financial resilience and economic development.