Senate body for amending Pakistan Marine Insurance Bill 2016

Senate body for amending Marine Insurance Bill 2016

The Senate Standing Committee on Commerce and Textile Industry recommended for further amendments in the ‘Pakistan Marine Insurance Bill, 2016’ to make it internationally compatible.

The Ministry of Commerce and Textile Industry drafted the ‘Pakistan Marine Insurance Bill, 2016, with the objective to encourage and promote marine insurance sector, provide a legal framework for regulations, remove contradictions and similarities with other laws existing in the field and provide rules for construction/interpretation of marine insurance policies.

The committee met here with Syed Shibli Faraz in the chair on Wednesday to discuss the Bill to regulate the business of marine insurance. The bill has been referred to the committee by the Senate, while the National Assembly has passed the Bill during its session on May 17, 2017.


The committee was informed that the Insurance Ordinance 2000 (Section 4.(3)(a) classifies marine, aviation and transport business as non-life insurance business. However, Section 115 of the Insurance Ordinance 2000 titled ‘Application of Pakistan law to policies in Pakistan’ states that nothing in this section shall apply to a policy of marine insurance. Therefore, as such the matter of marine insurance is not covered by the ‘Insurance Ordinance 2000.’

Presently, Pakistan does not have a law to deal with marine insurance. The marine insurance business in Pakistan is carried out on the basis of British Marine Insurance Act, 1906. This Act has long been held as the international industry standard and the marine insurance acts of many countries are based on this Act.

The committee was further informed that the disputes involving marine insurance have been decided by the courts in Pakistan by following the general provisions of British Marine Insurance Act and then interpreting these in the light of laws applicable in Pakistan. As substantial part of the marine insurance is re insured in the international market; therefore, any interpretation different than the international practices considerably complicates business relations.


In the year 2001, the Ministry of Commerce initiated a Trade and Transport Facilitation Project (NTTFC) with the technical assistance of United Nations Conference on Trade and Development (UNCTAD). One of the main objectives was to modernize the marine transport insurance provisions in Pakistan.

In this regard, an international marine insurance consultant Matthew Marshall visited Pakistan a number of times and held detailed discussions with all stakeholders. A Pakistani legal consultant Barrister Zahid Jamil was also engaged to ensure that text of the draft law was in accordance with the agreement reached with the stakeholders and the drafting practices for Pakistani legislation.

The stakeholders in Pakistan insisted that in view of the voluminous case built up over a century following the British Marine Insurance Act, 1906, the law to be drafted for Pakistan should be exactly in accordance with the British Act. The same was done in India when it enacted the Marine Insurance Act 1963. In Pakistan, the proposed bill to legislate the Marine Insurance Act has been drafted accordingly. The main areas covered by the proposed Marine Insurance Bill include the following:

Marine insurance definition, insurable interest, insurable value, disclosure and representation, policy, double insurance, warranties etc, voyage, assignment policy, premium, loss and abandonment, measure of indemnity, rights of insurer on payment, return on premium mutual insurance, supplemental and schedule of rules for construction of policy.

To avoid conflict of interpretation, the Bill has a provision for repeal of sub-sections of Sections 130A and 135A of the Transfer of Property Act 1882. As the Transfer of Property Act, 1882 is a provincial Act, the matter was referred to all the provincial governments for their concurrence to repeal these sections obtained.

The Ministry of Commerce solicited views/comments of Pakistan National Shipping Corporation (PNSC), Securities and Exchange Commission of Pakistan (SECP) and NICL, provinces and insurance industry.

According to PNSC, the marine insurance bill is a replica of the UK Marine Insurance Act, 1906 which sets out the rights and obligations of the insurer, the insured and principles for dealing with different types of insurance claims. However, recently the UK Marine Insurance Act 2015 has come into force in August, 2016 and all contracts of insurance and reinsurance are now governed by this Act. The PNSC has, therefore, suggested that it would be appropriate to consider the updated version of UK Marine Insurance Act.

The Securities and Exchange Commission of Pakistan has proposed that the Bill may be shared with the insurance industry or its representative association for their views. According to the SECP, the Bill does not have any provision for a body/institution to regulate and supervision of marine insurance business. However, the SECP has supported enactment of the Bill based on the provisions of UK Marine Insurance Act, 1906 as other jurisdictions have made local laws related to marine insurance based on it. Regarding the Bill, the SECP has pointed out that Sections 86 of Chapter-17 of the Bill is in conflict with Sections 5 and 6 of the Insurance Ordinance 2000 which allows only eligible persons to undertake insurance business in Pakistan subject to its registration with SECP as an insurer instead of "mutual insurance” as provided in section 86. The SECP has, therefore, suggested deleting this section of the Bill. It has also been proposed to replace the term "assured” in the Bill with the term "policyholder” or "insured”.

According to NICL, the UK Marine Insurance Act, 1906 has been modified over the years and some sections have been repealed or superseded by subsequent legislation. The most recent legislation governing marine insurance business is now the UK Marine Insurance Act, 2015 which came into force in August, 2016.

Keeping in view the changing business environment, certain amendments have been proposed in provisions relating to the duty of "utmost good faith, duty of disclosure, effect of breaches of warranties and contracting out of certain provisions of the Act.” On the other hand, the Marine Insurance Bill is still based on the old Insurance Act of 1906. The NICL has, therefore, proposed amendments in Sections 1, 11, 17, 18, 19, 20, 22, 26, 34 and 35 of the Bill to bring it in conformity with the present day commercial need.

The committee after hearing the view of all stakeholders formed a five-member committee to incorporate the input of all stakeholders.

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