Targeting Growth “As the insurance industry grows, reforms have to be made to keep up with the trends.” announced the brochure of Pakistan Society of Actuaries, who organised the above Conference to address this need.

The conference was held at the Karachi Sheraton on 2nd August 2007 and was a means for insurance professionals in Pakistan to get a detailed picture of the current scenario and be abreast with developments in the insurance sector. It also provided an opportunity to listen to, as well as play a role in generating ideas to stimulate growth. Key note speakers at the Conference were from the industry, including chairmen of SECP and IAP.

Our Managing Director Mr Tahir Ahmed, as the Chairman of IAP said, “The non-life insurance sector of Pakistan is highly fragmented in the sense that there are more than 40 insurance companies that are involved in the insurance business, but 85% of the business is written by 10 major insurance companies. On the other hand, he said that there was tremendous potential for sustained and rapid growth in the non-life insurance sector with some adjustment in our legislations, regulations and attitudes.” Major areas which can impact growth are:

• Paid-up capital
• Motor 3rd Party Liability insurance
• Health insurance
• Crop insurance
• IPPs and Oil & Gas exploration sector
• Takaful
• Insurance education

Paid-up Capital: Appropriate and adequate paid-up capital attracts serious players who have the resources to invest in qualified manpower, infra-structure and R&D. It also helps the insurer to reduce its reliance on reinsurance as well as reach more consumers with better and newer products. Reduced reliance on reinsurers also means more premium retention in the country and consequent less out-flow of foreign exchange. It also encourages healthier competition and gives rise to niche players.

Motor 3rd Party Liability Insurance: This product has the maximum potential to alleviate hardship of common man and play a crucial role in building the image of insurance in the minds of people. Motor statistics of our country reveal the magnitude of service that insurance companies can provide the common and the revenue that can be raised by them and the government.
To the common man in Pakistan, motor 3rd party insurance is just a scrap of paper to keep the ‘once in a while’ enquiring policeman at bay. It is sold to him by spurious insurance companies operating from a brief case or a ramshackle booth at the Excise & Taxation Office.
If relevant authorities including SECP show the will and commitment to stop activities of spurious companies and appropriate amendment in the Motor Vehicle Ordinance is made, much can be achieved. IAP has worked out practical suggestions for SECP to accomplish this.

Health Insurance: Life expectancy, infant mortality, matCrop / Livestock Insurance: Crop and livestock insurance combined, have a potential to generate Rs 2-3 billion worth of premium but more importantly this insurance will benefit the largest and perhaps the poorest section of population. The scheme will also lessen the financial burden of the government in times of calamities.

IPPS and Oil & Gas Exploration Sector: Insurances of Independent Power Plants have been given concessions to place their insurance outside Pakistan or place only 10% in the Pakistan insurance market. This deprives the local market of this portfolio which could easily be handled by them.
Foreign oil/gas exploration companies entering Pakistan are free to place 100% of Pakistani interest into their global insurance programme. If these companies are bound to place minimal 5-10% within Pakistan, it will encourage local industry to develop capacity and arrange treaties for this specialised class of insurance.

Takaful: At IAP we are convinced that Takaful will enlarge the insurance pie substantially as Pakistan is pre-dominantly a Muslim country where many Muslims are naturally attracted to its fold, provided the message is communicated clearly and to as many prospects as possible. We also strongly believe that windows have an important role to play in the development of Takaful in Pakistan. With combined effort of all quarters including the government, the media, dedicated Takaful companies and Takful Window Operators we should aim for 5% share of overall insurance market in the next five years and double the amount in the following five years.
Insurance Education: In mid-1980s 1% Federal Insurance Fee became applicable on all non-life insurance contracts with the intention to use the fund thus generated for insurance education and up-grade of fire-fighting facilities and equipment. By now Rs 2 billion has been generated but not a penny has been spent on either insurance education or in improving fire fighting facilities. However the new proposed insurance policy makes provision for establishment of Pakistan College of Insurance & Takaful in Karachi by converting the present Pakistan Insurance Institute. Whereas Lahore Insurance Institute, in collaboration with Hailey College Lahore, has started MBA in Risk
Management and Insurance.

The objective of the construction of the Karachi Northern Bypass (KNB) was to make easy movement of heavy traffic and cargo vehicles to and from Karachi Port and to maintain the traffic flow within the city limits.

The project of the Northern Bypass was started in 2002 with the cooperation of the National Logistic Cell (NLC) and the National Highway (NHA). The 57 km long Northern Bypass was constructed at a cost of Rs 3.5 billion.

The complete design of the KNB was assigned to Engineering Consultant International Limited (ECIL) by the NHA. For construction supervision the project was split into 2 packages by NHA where Package-1 was from Tower (KM 0+000) to Hamdard University (KM 32+000) done by NLC, and Package-2 was from Hamdard University (KM 32+000) to Super Highway (KM 57+000) by Abdul Aleem Associates (A.A).

Average height of embankment is 1 to 1.5 meters and approximate width of carriageway is 7.3 meters; 2 lane with 2% cross slope, 2 (Two) bridges in alignment + 1 (One) interchange an d 60 (Sixty) culverts. Pavement structure is composed of Sub-grade 30 cm, Sub-base 25 cm, Aggregate base course 35 cm, Asphalt concrete base course 14 cm and Asphalt concrete wearing course 5cm.

The collapsed bridge is situated at Paracha Chowk in Shershah and is part of Package-1 of KNB. It was inaugurated by President Pervez Musharraf on 6 August 2007.

The sudden collapse of a curved elevated section of recently inaugurated KNB, at the intersection of the RCD Highway and Central Avenue at SITE, has sent tremors through the engineering community and construction industry. About ten people have died and numerous vehicles lie crushed in the debris of the structure.

The frail track of the KNB Bridge was breaking down during the testing of the structure. After identification of the fault, the officials of NLC repaired the track under supervision of Belgian experts with hydrocarbon patches at the lower surface of track.

Inspection of these hydrocarbon slabs (after collapse of the bridge) disclosed that the slabs were affixed on the surface with a solution which can easily be removed by hand.

Also, about a year ago, the structure of the bridge tilted during construction. A decision was made not to dismantle and reconstruct, but to provide external reinforcement by jacking up the sagging portion.

However, the experts also stated that the affected curve was extremely sharp. The girder weighed about 4,000 tonnes and was supported by a tier/pillar of 1.5 metres, which should have been at least two metres to reduce the risk factor.

On the day of accident, sudden tyre burst of a bulk cement carrier at a sensitive point, resulted in extraordinary increase in dead weight, compounded by gravitational and negative forces of the traffic and a speed breaker on the bridge culminating in the tragedy.

The site was visited by Mr. Nabih Massad (VP Engineering Department, Swiss Re) & our Mr. Karim Merchant (SVP Engg/Bond & Risk Management, NJI) on 5th September, 2007.

Sources: The following sources have been utilized in preparation of the above article.

The News - http://henews.jang.com.pk/updates.asp?id=28561
Daily Times http://www.dailytimes.com.pk/ default.asp?page=2007%5C09%5C04%
5Cstory_4-9-2007_pg12_2
Write-up by: Mr Karim Merchant, SVP Engg/Bond and Risk Mgt. and Mr Ahsanullah, DM Risk Mgt.
Photographs: Courtesy Mr. Nabih Massaad,

By Karim Merchant and Ahsanullah

As a fresh Graduate, enticed by an impressive advertisement, I walked into the office of NJI for the position of a Trainee Officer. My first impression of the place was not very good and had it not been for the heat outside I would have perhaps quietly left without doing the test for which we were called. Any way I settled down on some pretty old furniture and proceeded with the test.

Telecommunications - Growth Story Continues!

Not long ago, having a large brick-like mobile phone was a significant status symbol in Pakistan. At the time, only the elite had the privilege of cellular phones and perhaps it was a bigger status symbol then than owning a car. But things have changed as they always do! Today Pakistan has one of the fastest growing cellular penetration rate in the world: 68 million Pakistanis are connected through mobile network as at August 2007, making this a phenomenal YOY cellular penetration rate of 73%, enabling Pakistan’s tele-density to reach 46.8%.1

Regional Comparison
If compared regionally, India’s tele-density stands at 22% of their population, with around 250 million people using cellular phone.2 The amount of investment that is pouring in the telecom/cellular industry in the region is phenomenal and globally everyone wants to have their share of the action. Recent acquisition of Paktel by China Mobile is a perfect example. Not only that, SingTel – a Singapore based telecom giant - has acquired 30% shares in WARID for $ 758 million from its sponsors in order to have a stake in the Pakistan’s booming telecommunications industry.3

If one sector of the economy is growing at phenomenal pace, it is likely that it also tends to boom other allied and non-allied industries along with it. Likewise this phenomenal growth in the cellular telecommunications has made significant impact in terms of business on the insurance sector. Currently, Insurance industry is underwriting assets worth billions of Rupees of various Mobile Network Operators as well as mobile phones of their end users.

Risk Transfer Program for Telecommunication Companies : From project initiation of a Telecommunication Company (Telco), Insurance Industry provides Marine Import and Erection All Risk Insurance covers, to safeguard the Telco’s sophisticated electronic and mechanical equipment, during the critical phase of erection. Another cover that is worth mentioning is bond, which is usually extended to Telco’s contractors, suppliers and other allied service providers for the initial setup of the nascent network. This support from the insurance companies enable the service providers to establish a firm relationship with their principal i.e. Telco.

Just like any other company in operation, all Telcos require an effective risk management program to guard their assets and revenue streams from unforeseen perils and operational risks. For that matter, a typical Telco Risk Transfer Scheme includes Fire & Allied Perils Insurance, Business Interruption Insurance, Electronic Equipment and Third Party Liability Insurances as TierAutomobile Insurance, Miscellaneous Insurance such as cash in safe and transit insurance, other Liability Insurance such as fidelity guarantees and directors’ and officers’ liability and Health Insurance for human capital.

Thus, effective risk management through transfer of risk to insurance companies has played a vital role in phenomenal growth of the telecom industry. The widest and the most comprehensive insurance covers allow the Telcos to operate in next-to-risk-free environment as their assets and liabilities are well covered by the Insurance Industry.

As these telecom companies grow more rapidly in near future, apart from conventional product offerings, Pakistani insurance sector needs to watch out for emerging technologies to further innovate and develop new marketable products for the Telecom Sector.

Emerging Technologies
Within telecom sector, the CDMA technology (Code Division Multiple Access) is becoming popular and CDMA phones are fast becoming economical and hassle free alternative for fixed line phones. This is quite evident from the growing presence of CDMA phones in households as well as offices provided by WLL4 Companies. What we need to look into is the fact that these telecommunication companies are fast growing and soon they will have complex insurance requirements for their expanding customer base.

An emerging technology predicted to revolutionise communication and information sharing, is Wi-Max. WiMAX, the Worldwide Interoperability for Microwave Access, a telecommunication technology aimed at providing wireless data transfer over long distances in a variety of ways; from point-to-point links to full mobile cellular type access enabling the delivery of last mile wireless broadband access as an alternative to cable and DSL.5 Wateen Telecom, Pakistan’s renowned communication company in the private sector has launched Wi-Max based services in Pakistan since July 1, 2006.

Wateen offers a range of carrier class telecom and multimedia services like fixed wireless and line telephony, “always-on” broadband for data, internet and TV/multimedia along with a host of other services and applications.6

Another area of growth for Telcos and especially for Mobile Network Operators, is revenue generation through Value Added Services. Recent trends suggest convergence of various services including entertainment, news, views and financial transactions in one single mobile connection. This means that a mobile phone user can watch TV, surf the internet, do banking or transfer funds through mobile phones by pushing just a few buttons. Recent launch of UBL Orion service is an explicit example of the way banking & telecommunications will be done in future. Although mobile banking has evolved to some extent, experts say that it will truly come of age in Pakistan when Network-Operator-based credit card transaction comes into play7 which is not a far cry considering the fast evolving nature of the telecommunication technologies and solutions.

Conclusion
With changing technologies and emerging trends there is need to make a careful analysis of the areas of growth and devise strategies to properly target those potential avenues in the telecom industry which will be fruitful for the insurance sector. As a growing insurance company, we must predict the emerging trends and develop new marketable products which will be the need of future. Surely Telecommunications is likely to show robust growth in months to come and the growth in the telecom sector offers untapped potential for Insurance Industry as well as for NJI.

The Singapore Actuarial Society organised a conference titled ‘South East Asia Health Insurance Conference’ in Singapore from 1st -3rd of August 2007 and I was extremely fortunate to have attended it, along with over 170 delegates from various other countries.

The conference was first of its kind and covered health insurance systems in South East Asian countries such as Thailand, Indonesia, Malaysia, Singapore and also insights from Japan, Australia, USA and Iran.
The significance of the conference was further enhanced by the inaugural speech on the role of health insurance in Singapore by the Minister for Health-Singapore, Mr. Khaw Boon Wan. This was extensively covered by the media and made headline news in the newspapers next day.

The healthcare dilemma which came to fore was that cost increase continue to outgrow economic growth and this problem gets worse for developing countries.

It was very interesting to note that no one country claimed to have the perfect solution although some of them stood out from the rest such as Singapore and Japan. Most strikingly one of the speakers from USA expressed how inefficient their system was and supported it with figures. The per capita expense on health in US stood at US$ 5,300 - more than twice the money spent by other developed countries, while Singapore managed it very efficiently at US $ 1,620/person.

It was indeed a very rare learning experience for all the delegates who were treated to the intricacies of the diverse health care markets of various countries and then participated in open panel discussions at the end of each day. It required a tremendous amount of concentration level to keep up with the pace of the events of the conference but proved very enlightening indeed and definitely gave me a relatively better grasp of the overall health care issues and also a few more grey hairs to deal with!!

By M. Nadeem Irshad

Advanced Diploma in Insurance
Why Advanced Diploma in Insurance
“To build a career in insurance industry an individual must have the knowledge, skills and core competencies needed to perform work effectively, both now and as his career progress.”
General insurance has in recent years gone through a period of unprecedented challenges and change. New forms of risk continue to emerge. Competition is intense, which has had major impact on the market and changed the way buisness is conducted.The Advanced Diploma provides an enhanced understanding of insurance practice, both in terms of technical subject matter and overall management skills.
By achieving Advanced Diploma in Insurance, individuals can reflect the changes that have taken place. It provides a means of achieving the requisite level of technical knowledge and understanding, ensuring that the individual has relevant skills to perform effectively and efficiently in the work place

The Advanced Diploma in Insurance is appropriate for:
• Today’s insurance managers and technical specialists
• Staff with aspiration to become managers in the future
• Those employees who wish to demonstrate their professional standing
• Insurance employees without another professional qualification and those who wish to build upon existing general academic qualification, such as a degree, by obtaining an industry-specific qualification

Questions you may have...? Credits required for the diploma: 290 (minimum 180 from Advanced Diploma level, rest you can choose from certificate and diploma) Credits per unit: 30 or 40 Number of available units: 26 Advanced Diploma units Compulsory Unit: 3 units Exam Format: 3 hours (essay style / case study questions and short answers) Average study time: 120 hours per unit Availability of exam session: Twice yearly - April / October Credits available for prior learning: Yes Competition award: Advanced Diploma in Insurance Designation: A C I I Contact: Pakistan Insurance Institute

Award in Insurance Provide basic fundamental knowledge

Certificate in Insurance Core level qualifications Requires 40 credits threshold

Diploma in Insurance Qualification recognize “Technical” development Requires 110 credits threshold

Advanced Diploma Professional and expert qualification Requires 290 credits threshold