The Securities and Exchange Commission of Pakistan has proposed major reforms to make insurance bonds and guarantees safer and more reliable for construction projects, government contracts, imports and other commercial activities.
The SECP said the proposed reforms would improve financial protection for contractors, businesses, government departments and project owners that rely on insurance guarantees.
The proposed framework seeks to make agreements for bid bonds, performance bonds, advance payment bonds and customs guarantees clearer. An insurance bond protects an affected party against financial losses if a contractor or business fails to meet its obligations.
The SECP said the reforms aim to reduce delays in claim payments, uncertainty in contractual terms and lengthy legal disputes involving insurance guarantees.
Under the proposed framework, insurance companies providing credit and suretyship insurance would face stricter assessments of their financial strength and business capacity. The SECP has also proposed stronger financial reserves, mandatory indemnity arrangements and improved reinsurance arrangements for insurers operating in this segment.
The regulator has proposed placing credit and suretyship insurance in a restricted category so that only financially strong and qualified companies can offer these services.
SECP Chairman Dr. Kabir Ahmed Sidhu said the reforms would help reduce financial risks in large projects and commercial agreements while increasing confidence in insurance guarantees.
He added that stronger insurance guarantees could support the timely completion of construction and commercial projects while improving financial protection for the parties involved.
The SECP has invited comments and suggestions from insurance companies, contractors, businesses and other stakeholders on the proposed reforms.
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