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The amount will be paid on happening of the specified act or event. E.g..
Death, Fire Accident, Motor Accident , Any peril in Sea.
Parties of Insurance Contract
Insurer
(The person who undertakes the risk under the contract)
Insured
( The person to whom the undertaking is given)
The Insurer can be any of the following mentioned below:
An individual
Unincorporated body of individuals,
Body corporate (established by the Companies Act)
An Association of partnership firm Registered,
Any other agency permitted under any other Law in Bangladesh
Regulatory Framework in BD
The Regulatory Framework
The insurance sector is originally regulated by the Insurance Act, 1938 and after
the Independence in 1971, the industry was governed by the Insurance Act 1973.
In 2010 a new Insurance Act has been passed to modernize the sector.
Major Insurance Acts
The Insurance Act, 1938
Insurance Rules of 1958
Bangladesh Insurance (Nationalization) Order 1972.
The Insurance Corporations Act, 1973
Insurance (Amendment) Ordinances of 1984
The Insurance Act, 2010
History of Insurance Law in BD
Insurance is not new in this territory, right after the partition in 1947, the
industry gets its momentum and 49 Companies conducted business during
the Pakistan period (1947-1971). After the Independence, the Insurance
sector Nationalized by Bangladesh Insurance Order 1972
As a result of it, on 14 May 1973, a restructuring was made under the
Insurance Corporations Act 1973. Following the Act, in place of five
corporations the government formed two: the Sadharan Bima Corporation
for general business, and Jiban Bima Corporation for life business.
Since then the Industry is growing steadily despite many backlogs, several
amendments were made in the Insurance Law since 1973. This year a New
Insurance Act passed by Parliament to replace the old Act
Major Regulatory Conflicts
The Conflicts
There was restriction regarding business placement which affected
the interests of the private insurance companies in many ways. Since
the public sector accounted for about 80% of the total premium
volume of the country, there was little premium left for the insurance
companies in the private sector to survive.
Private sector insurance companies demanded withdrawal of such
restrictions so that they could:
(a) underwrite both public and private sector insurance business in
competition with the SBC
(b) effect reinsurance to the choice of reinsures
Resolutions Solving the Conflicts
The Resolutions
The Government modified the system through promulgation of the
Insurance Corporations (Amendment) Act 1990.
The changes allowed private sector insurance companies to underwrite
50% of the insurance business emanating from the public sector and to
place up to 50% of their reinsurance with any reinsures of their choice, at
home or abroad, keeping the remaining for placement with the SBC.
This can cover a huge portion of the society who can be a prospective
target market for this business.
Changes Bought by the New Act
Capital Requirements:
An insurer transacting life insurance business would be required to have a minimum
paid-up capital of Tk. 300 million while the minimum paid-up capital for non-life insurer
would be Tk. 400 million.
Spread of Business in Rural Areas:
Provision has been made to induce insures to undertake such parentage of his
business in the rural areas or in social sectors as maybe specified by the Authority, This
provision would encourage saving in the rural areas and social sector on the one hand,
and provide financial security to the insurer, on the other.
Reinsurance Abroad:
The present mandatory provision for reinsurance of general insurance with the stateowned Sadharan Bima Corporation (SBC) has been relaxed. An insurer may reinsure
with any other insurer or outside Bangladesh.
Changes Bought by the New Act
Penalty
Under the new insurance law, maximum penalty for any violation will be Tk 10
lakh in fine while the minimum fine will be Tk50,000. If the violation continues, an
additional fine of Tk 5,000per day will be imposed.
Provision for Foreign Investment
With a view to attracting foreign investment in insurance sector, foreign investors
would be allowed to hold or subscribe to the share of an insurance company up
to a prescribed maximum.
Recommendations
The new Insurance Act 2010, introduced many essential features that
were missing but the implementation process were too slow, the
independent Insurance Regulatory Body(IRA) is not yet fully functional.
was not yet established and many of features are yet to be implemented.
To bring a real change and in the Insurance Business Sector the proposed
changes should be implemented prudently and as soon as possible.
ConcludingRemarks
I n t h e e r a o f g l o b a l i z a t i o n , D o m e
s t i c m a r k e t s h o u l d b e w e l l o r g a n i
z e d w h i l e t h e l e g a l f r a m e w o r k s h o u
l d b e e f f e c t i v e t o a d d r e s s t h e c h a n g
e d c i r c u m s t a n c e s . I n o r d e r t o m e e t t h
e s e challenges,Theinsuranceordinance2010werekeptasflexible a s p r a c t i c a b l e s o t h a t a
n y c h a n g e i n t h e o p e r a t i o n a l p r o c e d u r e , Ac c o
u n t i n g , Ac t u a r i a l s t a n d a r d t h a t w o u l d b e n e e d e d
i n f u t u r e i n l i n e w i t h o u t c h a n g e
i n t h e i n t e r n a t i o n a l a n d d o
m e s t i c e n v i r o n m e n t c o u l d b e m a d e w i t
h o u t f u r t h e r a m e n d m e n t t o t h e o r d i n a n c e . T h
e n e w a c t p r o m i s e d t o b r i n g t h e p o s i t i v e c h a n g e s
a n d w e a r e l o o k i n g f o r w a r d f o r t
h e b e g i n n i n g o f a g l o b a l l y competi
tivemoderninsurancesectorinbangladesh