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.

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