Final push for insurance industry reforms | The Daily Star
12:00 AM, June 25, 2008 / LAST MODIFIED: 12:00 AM, June 25, 2008

Final push for insurance industry reforms

Independent regulator, increased paid-up capital

Moves to set up an independent regulator to monitor the insurance industry are expected to be finalised in the coming weeks, as the government attempts to bring regulatory procedures in the expanding sector up to international standards.
“The law ministry vetted the proposed ordinances titled Insurance Regulatory Authority (IRA) Ordinance 2008 and Insurance Ordinance (IO) 2008 last week, and they will be sent to the cabinet next week,” a senior commerce ministry official told the Daily Star yesterday.
The new ordinances have been drafted based on international best practices, particularly with the India's Insurance Regulatory and Development Authority, officials said. It will replace the age old Insurance Act 1938 that currently regulates the industry.
The IRA will be a five-member team consisting of one chairman and four members. The IRA Ordinance 2008 will abolish the Department of Insurance and the IO 2008 will direct how the insurance companies will run by the regulators.
Major changes in these ordinances include mandatory solvency margin for the companies and increase their paid-up capital. Currently, a general insurance company requires Tk 15 crore as its paid-up capital, of which Tk 9 crore raised by initial public offerings (IPO). A life insurance company needs Tk 9 crore as its paid-up capital, of which Tk 6 crore must be raised by IPO.
A total of 60 insurance companies are currently operating in Bangladesh, of which 17 provides life insurance and 43 are in the general insurance field. With a mere one and half dozen of staff, the Chief Controller of Insurance under the Ministry of Commerce oversee the total industry that has about one crore policy holders in life insurance and at least 50 lakh with the general side.
All the countries in South Asia have modernised their insurance laws and shifted the industry to the ministry of finance from the commerce considering the models of the business, Nasir A Choudhury, managing director of Green Delta Insurance Co Ltd, said. But in our country the industry remained under the commerce ministry since its inception, he added.
“We are being treated as a trade body. The sector is always neglected here,” Choudhury, who has decades of experience in the insurance sector, said.
He observed, “Formation of an independent authority to oversee the industry is a very good move although it is too late compared to other countries.”

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