SECP unveils key reforms to strengthen insurance bonds, guarantees

The Securities and Exchange Commission of Pakistan has proposed a set of changes intended to strengthen the reliability of insurance-backed bonds and guarantees, Mettis Link News reported. Under the plan, guarantees used in building projects, public procurement, imports and ordinary business dealings would work more efficiently. The aim is to give contractors, companies, state departments and project owners stronger financial cover.

The regulator has suggested clearer terms for several kinds of guarantee, including those tied to bids, contract performance, advance payments and customs duties. An insurance bond, the SECP said, protects the affected party from financial losses when a contractor or firm does not meet its commitments. The proposals also seek to shorten delays in settling claims, reduce vague contract wording and cut down on lengthy court cases.

Companies offering credit and suretyship insurance would face tighter checks on their financial strength and operating capacity. The commission also proposes higher reserves, mandatory indemnity agreements and sturdy reinsurance arrangements, and restricts this business to firms that qualify. SECP Chairman Dr. Kabir Ahmed Sidhu said the measures would lower financial risk in major projects and improve confidence in these guarantees. The SECP has invited comments from insurers, contractors, businesses and other stakeholders.