Your
attention is drawn toward section 86 of Insurance Ordinance
2000 in terms of which any party to the contract shall
not stipulate, explicitly or implicitly, directly or indirectly,
that the insurance to be procured as a condition of the
contract must be placed with any specific or named insurer
or insurers, other than insurers specified generally as
a class according to objective criteria based on financial
strength.
2)
It has come to the notice of State Bank that some banks
are not observing this provision of law and naming insurers
of their choice or their own subsidiaries during the course
of their lending contracts. This is inconsistent with
the said provision of law.
3)
All banks / DFIs are, therefore, advised to follow the
provisions of section 86 of Insurance Ordinance in letter
and spirit, in future.
Please
acknowledge receipt.