A Karachi importer agrees to buy industrial machinery from Germany. The supplier offers a delivered price that includes marine insurance arranged overseas. The importer may consider the insurance an ordinary part of the purchase. His bank must ask a different question: does the arrangement comply with Pakistan’s foreign-exchange and marine insurance rules?
That question belongs primarily to Chapter 15, Insurance Business, of the State Bank of Pakistan’s Foreign Exchange Manual. The distinction matters before the contract is signed, not just when the payment reaches the bank.
What Chapter 15 actually covers
Chapter 15 addresses insurance policies issued to residents and non-residents, marine coverage for imports and exports, foreign-currency policies, reinsurance and settlement of insurance claims. The regulatory treatment changes with the policyholder, the risk being insured and the proposed currency of payment. A foreign invoice alone does not establish permission to send money abroad.
Marine insurance on imports: check the contract first
Paragraph 13 sets out the general framework for marine insurance on imports into Pakistan. Under the published rules, import insurance is ordinarily to be arranged through insurance companies operating in Pakistan, subject to the provision’s exceptions and later SBP instructions. Importers should review the insurance requirement before agreeing to purchase terms that place cover with a foreign insurer.
The commercial terms matter. FOB generally leaves freight and insurance arrangements to the buyer. CFR, historically called C&F, includes freight but not insurance. CIF includes cost, insurance and freight. These labels allocate contractual responsibilities; they do not override Pakistan’s exchange-control requirements.
An importer should not assume that a supplier’s CIF quotation or foreign insurance certificate is sufficient authority for the bank to make a separate insurance-premium remittance.
Special petroleum-import instructions issued in 2026
SBP issued EPD Circular Letter No. 04 on 11 March 2026 and EPD Circular Letter No. 10 on 7 May 2026, both concerning permission for imports of crude oil and petroleum products on a CIF basis. These are category-specific developments, not a general permission for every importer to buy marine insurance abroad.
The precise operative conditions of those circulars could not be independently established for this guide. Petroleum importers should obtain the full instructions and confirm their application with their Authorized Dealer. A machinery importer should not rely on a petroleum-specific instruction as an exemption.
A separate SBP instruction of 23 April 2026 dealt with financial instruments and standby letters of credit for specified energy imports. That change concerns import financing and must not be mistaken for a blanket insurance-remittance permission.
Marine insurance for exports
Paragraph 12 deals with marine policies covering exports. Whether a Pakistani exporter arranges insurance depends in part on the agreed sale terms. Under a CIF sale the seller normally undertakes to procure insurance; under FOB or CFR terms the buyer may bear that responsibility. The applicable SBP provisions govern the insurer and policy currency. Paragraphs 14 and 15 separately address shipments between countries outside Pakistan and coastal shipments.
Reinsurance is not the same as buying an overseas policy
A Pakistani insurer may transfer part of an insured risk to a foreign reinsurer. Chapter 15 contains a distinct framework for reinsurance-related payments, particularly paragraphs 23 to 25. These rules are directed at eligible insurance businesses and their Authorized Dealers; they do not give ordinary importers a route around marine insurance restrictions.
Documentation differs between facultative reinsurance, which covers an individually negotiated risk, and treaty reinsurance, which covers a defined portfolio. Banks may require prescribed declarations, supporting statements and relevant certification. The insurer should obtain the current checklist for its particular transaction rather than rely on a generic outward-remittance form.
Form M was revised in April 2026
On 6 April 2026 SBP issued EPD Circular Letter No. 07, revising Form M, Form R and the Inward Remittance Voucher. Authorized Dealers were instructed to adopt the revised formats and digitise specified customer-information procedures by 30 June. The circular also changed certain inward-reporting thresholds to USD 25,000 equivalent; that figure must not be presented as a general outward-remittance exemption.
Where Form M applies to a reinsurance remittance, the current version should be used. But a reporting form is not legal authority to make the payment. The bank must still establish permission under the relevant Chapter 15 provisions and subsequent instructions.
Can insurers issue US-dollar-denominated policies?
FE Circular No. 10 of 2017 permits a narrowly defined arrangement for qualifying resident insurance companies, including policies linked to specified foreign-currency loans and projects. The insurer must meet the prescribed rating requirement and obtain prior SBP approval for each proposal through an Authorized Dealer, supported by an SECP recommendation.
These policies are denominated in US dollars on a notional basis. The circular requires premiums to be collected in rupees and claims to resident companies to be paid in rupees where applicable. It permits foreign reinsurance of up to 99% of the sum assured within this specific arrangement, not as a universal allowance for all policies.
The same circular permits reinsurance claim proceeds, up to the outstanding foreign-loan liability, to be paid directly to the foreign lender in the specified circumstances. Remaining proceeds must be brought into Pakistan and paid to the claimant in rupees. This exception should not be confused with a general right to remit insurance claims overseas.
How insurance claims are settled
Chapter 15 distinguishes rupee non-life claims, claims under certain foreign-currency import policies, marine export claims and non-marine foreign-currency claims. Paragraphs 19 to 22 set out different routes depending on the risk, beneficiary and circumstances. The fact that a claim is calculated in foreign currency does not automatically make it payable abroad in that currency.
For example, the treatment of a marine export claim can depend on whether the Pakistani exporter has already received the export proceeds. Import losses financed under qualifying aid or loan arrangements have separate provisions. Businesses should establish the relevant paragraph and supporting evidence before instructing a bank to transfer claim proceeds.
What about individual policyholders?
Chapter 15 also addresses life insurance policies issued to Pakistanis, foreign nationals residing in Pakistan and Pakistanis abroad. Travel health insurance for Schengen countries has a separate provision. An individual purchasing travel cover should not assume that the corporate marine insurance and reinsurance rules apply to their policy.
The bank’s role, and what SWIFT cannot do
An Authorized Dealer must assess the purpose of the transaction against the applicable SBP instruction. It may request the policy, underlying contract, premium calculation, beneficiary information and transaction-specific declarations. Some documents are expressly prescribed by regulation; others arise from the bank’s due-diligence and screening obligations. The two should not be conflated.
SWIFT carries payment messages. It does not grant foreign-exchange permission. Even where a bank is authorised to process a payment, correspondent-bank screening or missing beneficiary information can delay execution. Our guide explains why an international payment may be stopped after the Pakistani bank approves it.
Chapter 14 and Chapter 15 serve different purposes
Chapter 14 governs specified commercial remittances, including various overseas service payments. Chapter 15 addresses insurance-specific transactions. A foreign insurer’s invoice should not simply be treated as an ordinary service invoice if the insurance provisions govern the transaction.
For the wider operational context, consult the Chapter 14 guide and our cross-border payment screening explainer.
The question to ask before signing
A business can negotiate a shipment price in minutes and spend weeks correcting an insurance arrangement the bank cannot process as expected. Before accepting a foreign-insured quotation, ask which Chapter 15 provision applies, whether any exception covers the transaction, and which documents the Authorized Dealer will need. The answers are more useful before the cargo is shipped than after a premium falls due.
Official sources and regulatory qualification
Primary sources: SBP Foreign Exchange Manual, Chapter 15 (published 2018 text); SBP current manual index; FE Circular No. 10 of 2017; and SBP 2026 EPD circular register.
Regulatory note: This article is educational, not transaction-specific legal or tax advice. The complete operative text of the March and May 2026 petroleum-import circulars and a fully consolidated 2026 Chapter 15 were not independently compared for this guide. Confirm the latest provisions and any transaction-specific permission with your Authorized Dealer before committing to contractual payment terms.