Insurance laws Bangladesh
The insurance sector in Bangladesh is governed by a comprehensive legal framework designed to regulate the industry, protect policyholders, and ensure its systematic development. The key laws and the regulatory authority are as follows:
Regulatory Authority
Insurance Development and Regulatory Authority (IDRA): Established by the Insurance Development and Regulatory Authority Act, 2010, the IDRA is the sole government body responsible for supervising and developing the insurance sector in Bangladesh. Its functions include licensing and registration of insurers, reinsurers, and intermediaries; inspecting and investigating insurance institutions; and protecting the interests of policyholders.
Key Legislation
The primary statutes governing the insurance business in Bangladesh are:
Insurance Act, 2010: This is the foundational law that replaced the previous Insurance Act of 1938. It modernizes and updates the legal framework, outlining the requirements for conducting insurance business, from the definition of an insurance contract to the management of insurance companies.
Insurance Development and Regulatory Authority Act, 2010: This act established the IDRA and defines its powers, duties, and responsibilities as the central regulatory body.
Insurance Corporations Act, 2019: This act regulates the state-owned insurance corporations, namely Sadharan Bima Corporation (SBC) for general insurance and Jiban Bima Corporation (JBC) for life insurance.
Key Features of the Regulatory Framework
Licensing and Registration: All insurance companies must be licensed by the IDRA to operate. The law specifies capital requirements and other criteria for both life and general insurance businesses.
Separation of Business: The law requires a separation of life and non-life insurance operations. A single company cannot hold both types of licenses.
Reinsurance: The laws include specific provisions for reinsurance. For non-life insurance, a portion of the business must be ceded to the state-owned Sadharan Bima Corporation (SBC). The remaining portion can be reinsured with SBC or with other insurers, domestic or foreign. Life insurance business can be fully reinsured with a foreign insurer.
Compulsory Insurance: Certain types of insurance are mandatory in Bangladesh, such as motor vehicle insurance (third-party liability) and workers' compensation insurance.
Proposed Reforms: The government has recently been working on amendments to the insurance laws to further strengthen the IDRA's authority. These proposed changes aim to:
Limit family ownership and control on the boards of insurance companies.
Give the regulator more power to restructure or dissolve the boards of non-compliant insurers.
Introduce stricter penalties for violations, including fines and potential prison sentences.
Create a customer protection fund to safeguard policyholders' claims.
Change the commission structure for life insurance agents.
Restrict the use of company assets for personal loans to directors or their families.
The legal and regulatory framework for insurance in Bangladesh is continually evolving to address industry challenges, enhance stability, and protect consumers.
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