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KARACHI: The Securities and Exchange Commission of Pakistan (SECP) has proposed reforms to make insurance bonds and guarantees safer, clearer and more reliable, particularly for construction projects, government contracts, public procurement and trade, a statement said on Wednesday.
The proposed framework covers bid and performance bonds, mobilisation advance guarantees and customs guarantees issued by insurers. These instruments provide financial protection to government departments, project owners and commercial entities if a contractor or business fails to meet its contractual obligations.
The reforms propose clearer conditional and unconditional guarantee contracts, stronger solvency and reserving requirements, risk-based pricing, mandatory indemnification agreements and adequate reinsurance arrangements. They are intended to reduce contractual ambiguity, claim-settlement delays and prolonged litigation.
The SECP has also proposed classifying credit and suretyship insurance as a restricted class of insurance business. This will enable closer scrutiny of insurers and help ensure that only financially capable companies undertake such business.
Chairperson of SECP Dr Kabir Ahmed Sidhu said the reforms will strengthen risk management and insurers’ financial capacity, improve contractual clarity and enhance public confidence in insurance-backed bonds and guarantees.
The SECP has invited insurers, contractors, businesses, government entities and other stakeholders to submit comments on the Consultation Paper, which is available on its website.
