End to war risk cover unlikely to hurt local insurers

KARACHI: The cancellation of war-risk coverage for ships by foreign insurance companies in the Gulf region is expected to have only a “limited direct financial impact” on insurance companies in the country, according to experts in business and industry.

However, it may create operational and business challenges for the marine insurance sector, they said.

Industry sources indicate that at a time when reinsurers and retakaful operators are dictating terms, local insurers are required to comply with these conditions under reinsurance treaties signed by them.

The Insurance Association of Pak­is­t­­an (IAP) is expected to play a coordinating role in tackling the situation. The association generally works closely with the Securities and Exchange Com­mission of Pakistan (SECP) to monitor industry exposure, engage with international reinsurers, and ensure financial stability within the sector.

Mohammad Raza, Non-Life Com­mit­tee and Property Committee member of IAP, said consultations were underway to reassess underwriting policies, review reinsurance arrangements, and ensure insurers maintain adequate solvency levels.

If the conflict prolongs, the government may consider policy support mechanisms to safeguard maritime trade. In several countries, governments have intervened during geopolitical crises by establishing sovereign war-risk insurance guarantees or maritime insurance pools, he said.

Pakistan could explore similar mechanisms by setting up a reinsurance company that could provide temporary support for essential maritime trade and energy shipments, Mohammad Raza suggested.

Saquib Zeeshan, the CEO of Pak-Qatar General Takaful, said the impact of war risk cancellation for vessels may remain limited. If the situation, however, continues to escalate over a longer period, it is likely to have an........

© Dawn Business