Features of

Insurance Law of
Bangladesh
Introduction
The Insurance business has developed in proportion to the
development of the economic growth in Bangladesh. There
are 62 insurance companies in the country, including two
state-owned enterprises, the Jiwan Bima Corporation (JBC)
for life insurance, and the Sadharan Bima Corporation
(SBC) forgeneral insurance.

Nevertheless, BD remains behind its neighbours, both in

terms ofpremium income and penetration. Only 1.5
percent of the population has life insurance coverage in
Bangladesh, as compared to 4.5 percent in Pakistan and 7.5
percent in India.
Meaning of Insurance
It is a contract in which one party known as the insured
orassured, insure with another person, known as
theinsurer, assures or underwrites his property or life, or
the life of anotherperson in whom he has a pecuniary
interest, or property in which he isinterested, or against
some riskor liability, by paying a sum of money as the
premium. Under the contract, the insurer agrees to
indemnify the insured against a loss which may accrue to
the other on the happening of some event.
Features of Insurance
Shifting or transferring risk of loss or damage
Sharing of losses by members of the group
One party undertakes tomake good theloss of theother
party
The risk is for a consideration of money called as Premium (No
risk to be assumed unless premium is received in advance)
The amount will be paid on happening of the specified act
orevent. 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

TheInsurer can beanyof the following mentioned below:

An individual
Unincorporated body of individuals,
Body corporate ( established bythe Companies Act)
An Association ofpartnership firm Registered,
Any other agency permitted under any other Law in Bangladesh
Types of Insurance (Life
Insurance)
Life Insurance
Life insurance pays out a sum of money either on the
death of the insured person or after a set period.
Types of Life Insurance
Term
Whole Life
Endowment
Joint Life
Types of Insurance (General
Insurance - Marine)
Marine Insurance
This insurancecovers the loss or damage of ships, cargo, terminals,
and any transport or cargo by which property is transferred, acquired,
or held between the points of origin and final destination.
Types of Marine Insurance
Voyage Policy
Time Policy
Valued Policy
Wagering policy
Floating Policy
Types of Insurance (General
Insurance - Fire)
Fire insurancecovers damage or loss to a property
because offire. It is a specific form ofinsurancein
addition to homeowner's or propertyinsurance, and it
covers the cost of replacement and repair or
reconstruction above what the propertyinsurancepolicy
covers.
Types of Fire Insurance
Specific Policy
Valued Policy
Average Policy
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 anew 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 49Companies 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 placeof 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 manybacklogs,
several amendments were made in the Insurance Law since 1973.This
year a New Insurance Act passed by Parliament toreplace the old Act
Major Regulatory Conflicts
The Conflicts
There was restriction regarding business placement which affected the
interests of theprivate insurance companies in many ways. Since the
public sector accounted for about 80% ofthe total premium volume of
the country, there was littlepremium left for the insurance companies
in the private sector to survive.
Private sector insurance companies demanded withdrawal
ofsuch restrictions so that they could:
underwrite both public and private sectorinsurance business in
competition with the SBC
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 to50% of their reinsurance with any reinsures of their choice,
at home or abroad, keeping the remaining forplacement with the SBC.

Many other changes were introduced such as privatization policy, which

paved the way for a number ofinsurers to emerge in the private sector.
The New Insurance Act, 2010
To create a vibrant insurance sector, the industry got
itsrecognition from the government and a new Insurance
Act2010has beenpassed toreplacing the oldInsurance
Act of1973.
Name The Insurance Act 2010
Act Number 25 of 2010
Summery The law is related to the matters
od insurance
Ministry Ministry of Finance
Date of Implement Thursday 18 March, 2010
Overview of the New Act, 2010
New Additions by the Act, 2010
 New Addition by the
Act, 2010
Legal Framework for Islami Insurance
Micro Insurance Business
Changes Bought by the New Act
CapitalRequirements:
An insurer transacting life insurance business would berequired 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 state-owned
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 BDT 1,000,000 infine while the minimum fine
will be BDT 50,000. If the violation continues, an additional fine
of BDT 5,000 per day will be imposed.

Provision for ForeignInvestment

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 aprescribed maximum.
Recommendations
The new Insurance Act 2010, introduced many
essential featuresthat weremissing butthe
implementationprocess 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

Sectorthe proposed changes should be implemented
prudently and as soon as possible.
Concluding Remarks
In the era of globalization, domestic market should be
well-organized while the legal frame work should be
effective to address the changed circumstances. In order
to meet these challenges, the Insurance Ordinance 2010
were kept as flexible as practicable so that any change in
the operational procedure, accounting, actuarial standard
that would be needed in future in line with out change in
the international and domestic environment could be
made with out further amendment to the Ordinance. The
new Act promised to bring the positive changes and we
are looking forward for the beginning of a Globally