Supervision and Control

Principal Legislation

  • Insurance Act 1995 (non life market) (Insurance (Amendment) Act 1996 (Act No 42 1996) and the Insurance (Amendment) Act 1998 (Act No 13 1998)
  • Life Insurance Act 2000
  • Motor Vehicles (Third Party Insurance) Act 1995
  • Workers’ Compensation Act 1978


The non-life insurance market in Papua New Guinea is regulated quite separately from the life insurance market, with two separate regulatory bodies, these being the OIC for non-life, and the Financial Systems Supervisory Department of the Bank of Papua New Guinea (Supervisory Department) for life and superannuation.

The OIC forms part of the Ministry of Finance and Treasury.

The supervisory authority for life insurance (and superannuation) is the Supervisory Department.

Admitted / Non-admitted

Non-admitted insurance is not permitted because the law provides that insurance must be purchased from locally licensed insurers with some specified exceptions.

Certain specified contractors and sub-contractors working on the PNG LNG construction project have been specifically exempted at government level from the admitted insurance regulations provided for in the Insurance Act 1995 except in respect of workers’ compensation business. A list of these firms can be found in the sections of this report dealing with construction and energy insurance.

Compulsory Classes

  • Motor third party bodily injury.
  • Workers’ compensation (occupational accident insurance).
  • Directors’ and Officers’ liability insurance (D&O) for directors of superannuation funds.
  • Professional indemnity for insurance brokers and loss adjusters.

State Involvement

There are no state-owned life insurance companies in this market. The government owns the Motor Vehicle Insurance Limited (MVIL) which enjoys a monopoly of compulsory motor third party insurance.

Tariff Classes

The compulsory tariff is mandatory for motor third party bodily injury insurance.

Premium Taxes and Charges

All non-life excluding travel, export cargo and health insurance is subject to 10% VAT paid by policyholder. The policyholder for all non-life is also subject to Supervisory (OIC) levy of 1% of the gross premium. Worker’s Compensation class is subject to 14% gross of premium levy payable by policyholder to Ministry for Labour and Industrial Relations.

Policy Language


Non-Life (P&C) Insurance Market

Local insurers are obliged by the terms of Article 36 of the Insurance Act to offer all of their outwards reinsurance treaties and facultative business to Pacific Re. A number of major items of business may be still escaping to overseas markets without any local offering.

Insurers must obtain the approval of the OIC before they put outwards treaty reinsurance programmes into effect.

There are no signs of a development of any multi-year or multi-class programmes. It is unusual for proportional treaty reserves to be retained.

Reinsurance Market

There is only one locally-based reinsurer in the market. It was established in 1996 and started operating in 1997. The company writes non-life reinsurance business only in the local market and in countries in the Pacific Ocean.

Permission to remit reinsurance premiums outside the country is only granted upon satisfaction that the subject reinsurance conforms with regulations (including Section 36 of the Insurance Act 1995, which mandates the priority offering of all outwards treaty and facultative reinsurance to the local reinsurance company).

There are no local companies transacting life reinsurance.

Distribution Channel

There have been no significant changes in distribution patterns in the non-life market over the last few years.

The provisions of the Life Insurance Act 2000 regulate brokers in addition to the insurers that operate in Papua New Guinea’s life market. It may be noted, however, that thus far there are no licensed insurance or reinsurance brokers in the life market.

Life insurers do not generally employ dedicated sales staff but have agency managers whose job it is to promote and encourage sales through the agency networks for which they are responsible. In a small market such as that of Papua New Guinea is not unusual for senior insurance management to get directly involved in the bigger sales.

Agents previously played an important role as far as endowment sales were concerned but are not considered presently to be major players in the insurance market as a whole.

Natural Hazards

Earthquake activity in PNG is caused by the interaction of two major lithospheric plates, the Pacific and the India-Australia Plates, which collide in the PNG area. Even though Papua New Guinea is susceptible to earthquake activity, few have caused great numbers of casualties or property damage. This is because earthquakes tend to occur in remote areas where insured risks are few and far between. Earthquake and related perils are covered by an extension to the basic fire policy.

Certain regions such as the province of Milne Bay are particularly susceptible to high winds. Windstorm cover is usually provided at no extra charge. Deductibles of between PGK 500 and PGK 10,000 apply in the case of ISR policies but not in the case of fire policy extensions. Papua New Guinea does not suffer greatly from floods (at least not to the extent that would seriously concern insurance underwriters).