Parliament on Wednesday passed two insurance laws in a bid to further strengthen the regulatory framework and make the industry operationally vibrant.
The passage of the laws came after the bills were placed by the finance minister in parliament on July 9 last year.
The new laws are Insurance Act 2010 and Insurance Development and Regulatory Authority Act 2010.
The insurance act bars a director of an insurance company to become director of any other financial institution including banks.
It also raised the paid-up capital of life and non-life insurance companies to make them financially sound.
The minimum paid-up capital of a life insurance company will now rise to Tk 300 million (TK.30 CR) from Tk 75 million and for non-life the capital size will be Tk 400 million (TK.40 CR) from Tk 150 million.
The bills were placed before parliament in July last and the standing committee on finance after scrutinisation submitted the bills to the House in September.
The insurance sector has praised the finance minister and the standing committee to pave the way for making the bills as acts.
Chairman of the Bangladesh Insurance Association chairman Rafiqul Islam said, "All of them worked very hard to enact the laws and we are thankful to the minister and JS body chairman AHM Mostafa Kamal and other members."
He said the association will sit today (Thursday) to examine the pros and cons of the new acts and will give its reaction later.
"As we are yet to know the details of the new laws, it is not wise to make any comment on them right now," he added.
Parliament member Abdul Matin Khasru of Comilla brought an amendment to the Insurance Act to bar a director of an insurance company to become a director of another financial institutions and the House endorsed it.
Standing committee on finance chairman Mostafa Kamal said barring an insurance director to become a director of another financial institution will contradict an amendment to the Financial Institution Act 1993 initiated by the Awami League government in 2001.
The amendment stipulated that director of a financial institution is eligible to become director of other financial institution.
"The standing committee in its recommendations did uphold the spirit of the amendment to the previous laws, but the House has made the amendment null and void," he said.
The house also endorsed another amendment proposed by Mostafa Faruk Mohammad of Jessore to the capital structure of insurance company.
He proposed that 60 per cent capital of any insurance company would be supplied by sponsors and 40 per cent by the general investors. It was 50:50 in the bill.
There are 62 insurance companies operating in the country and they need to be regulated under comprehensive laws and guidelines and supervised by a strong regulatory authority.
The Insurance Act 2010 said the sector needs to be managed properly and be strengthened by reducing business risks, and local and international insurance laws need to be harmonised considering the socio-economic aspect of the country.
The act proposed that insurance companies to be categorised as 'life' and 'non-life' instead of 'life' and 'general' and it has replaced the Insurance Act 1938.
The Insurance Development and Regulatory Authority Act said the authority will comprise a chairman and four members and they will look after the whole sector. The enactment of the law will abolish the department of insurance under the finance ministry.
It said there is an increasing need to regulate one of the largest sectors in the country, harmonise local and international insurance laws considering the socio-economic aspect of the country, and protect the interest of policy-holders and other beneficiaries.
Premium charged by the companies will be determined by a committee formed by the authorities and it will also investigate any irregularities of the companies, the act said.
Source: The Financial Express, March 04, 2010
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