ORDER This order shall dispose of the Appeal No,17 of 2008 filed under section 33 of the Securities and Exchange Commission of Pakistan Act, 1997 by Asian Mutual Insurance Company (Guarantee)
Ltd. (the "Appellant") against the directive of the Chairman, Securities Exchange Commission of Pakistan ("SECP"), (the "Impugned. Directive") dated 6-5-2008.
2. The appellant is a mutual insurance company incorporated on 23-2-1951 and was later registered under the provisions of section 6 of the Insurance Ordinance, 2000 (the "Ordinance"). The appellant was allowed to transact business of "motor class of insurance including motor 3rd party compulsory business", under the certificate of registration issued on 1-1-2001.
3. That after coming into force of the Ordinance, the Insurance Division of SECP sent a notice, dated 30-12-2002 calling upon the appellant to comply with the provisions of section 29 of the Ordinance read with Rule 9 of the Securities and. Exchange Commission of Pakistan (Insurance) Rules, 2002 (the "Rules") and submit the statutory deposit of two and half million (2.5) million as then required.
However, the appellant in its reply to the afore-said notice dated 9-1-2003 stated that it is a mutual insurance company and it is not required to comply with, the requirements of section 29 of the Ordinance, which only applies to the companies with a paid-up capital.
4. SECP in pursuance of its earlier communication and in exercise of its powers under section 63 of the Ordinance called upon the appellant through the Impugned Directive dated 6-5-2008 to comply with the requirements of section 11 of the Ordinance within one month of the issuance of the Impugned Directive, failing which the appellant was directed to cease entering into new contracts of insurance. The Impugned Directive was issued on the basis that the appellant had:
(a) Failed to maintain statutory deposit of Rs,5 million, as provided in S.11(1)(b) of the Ordinance with State Bank of Pakistan; (Note: It may be clarified by us here that the amount of statutory deposit had been raised to five (5) million.Rupees as per rule 9(3) of the rules at the time of issuance of the Impugned Directive).
(b) Failed to meet the minimum solvency requirement as set forth in section 11(1)(c) and section 36 of the Ordinance; been clearer, had the words "or ten percent" been used instead of "and ten per cent". Nevertheless, the intent of the legislature is clear i,e, all insurance companies are required to make a deposit of ten (10) million rupees, however, where such companies have a paid-up capital; the statutory deposit must be ten percent of the insurers paid-up capital where such percentage works out to more than ten (10) million rupees.
' In any case the above brief discussion by us on the Notification of 25-6-2008 and section 29(2)(a) of the Ordinance are academic, as they for they present purposes are neither applicable nor material to the case.
13. On the issue or whether the appellant meets the minimum solvency level, it transpires from the appellant own record that it does not meet the solvency level as prescribed by law. Section 36 which lays down the criteria for solvency, reads as follows:--
36. Insurers of non-life insurance business to have assets in excess of minimum solvency requirement.-- (1) An insurer registered under this Ordinance to carry on non-life insurance business shall at all times have admissible assets in Pakistan in excess of its liabilities in Pakistan of an amount greater than or equal to the minimum solvency requirement.
(2) An insurer incorporated in Pakistan and registered under this Ordinance to carry on non-life insurance shall at all times have admissible assets in excess of its liabilities of an amount greater than or equal to the minimum solvency requirement.
(3) For the purposes of this section, the minimum solvency requirement is the greatest of:
(a) such required minimum amount as may be prescribed by the Commission; Emphasis added.
(b)
(c)
(4)
' The minimum solvency has been prescribed by the Commission in rule 13(1)(b) of the rules, which states:--
13. Solvency of non-life insurer.--(1) For the purposes of clause (a) of subsection (3) of section 36 of the Ordinance, the following shall be the prescribed amount, namely:-
(i) In the case of an insurance company registered after the commencement date, fifty million rupees; and
(b) In the case of an insurance company registered at the commencement date:
(i) the amount applicable under the repealed Act, until the 31st December, 2002;
(ii) fifteen million rupees until the 31st December, 2003;
(iii) twenty-five million rupees until the 31st December, 2004; and
(iv) flu million ru ees until the 31st December 2005 and thereafter Emphasis added The minimum solvency level has been raised gradually from year, 2003, where it was fifteen (15) million rupees to fifty (50) million rupees by the year, 2005 and beyond. The appellant's record illustrates admissible assets of five million two hundred and sixty eight thousand (5.268) Rupees for the year, 2007 which are to be considered for the purpose of solvency. The appellant has therefore failed to maintain and gradually enhance its assets and as result could not meet the solvency level laid down in rule 13 (1)(b) of the rules and thus not entitled to the waiver of statutory deposit as provided in proviso to section 29(2)(b).
14. We have also examined the status of mutual insurance companies, to see whether the intention of the legislature was to treat them differently from the insurance companies with a paid-up capital. We find that the Ordinance does not distinguish between an insurance company with a paid-up capital and one which does not have a paid-up, as such all requirements of the Ordinance other than maintaining paid-up capital mutatis mutandis apply to mutual insurance companies.
15. For the reasons stated the appeal is not maintainable. The appellant had sufficient time to comply with the requirements of law and which it has failed to do. The appellant is directed to strictly comply with the Impugned Directive. We further direct that the appellant shall cease to carry out any kind of insurance business.