Global Trade Alert

On 1 November 2017, the State Bank of Pakistan through Foreign Exchange Circular No. 10 of 2017 allowed resident insurance companies to issue USD denominated insurance policies for meeting requirement of a foreign lender on foreign currency loans or for projects undertaken between Pakistan and a foreign/multilateral agency.

Such companies must be rated at least A by an approved Pakistani agency and will require an approval from the State Bank of Pakistan, wherein the application will require an explicit approval from the Securities and Exchange Commission of Pakistan for each proposal.

The terms and conditions for such insurance policies include, amongst others -

• Premium is to be collected only in Pakistani Rupee (PKR)
• Payments of claims will be made to the resident company in PKR only
• The insurance company can get reinsurance form a foreign company on such an insurance of up to 99% of the insured sum
• Reinsurance claims may be paid directly to the foreign lenders by the foreign insurers only up to the outstanding liability, while the remaining reinsurance claim has to be repatriated to Pakistan and paid to the claimant in PKR only