Gen insurers must invest 7.5pc of assets in govt securities

Jasim Uddin | Published: 00:00, Nov 19,2019


Non-life or general insurance companies must invest 7.5 per cent of their assets in government securities, according to new regulations of the Bangladesh Insurance Development and Regulatory Authority.

The IDRA on November 14 issued the regulations titled Insurance (Non-Life Insurers Asset Investment and Preservation) Regulations-2019 to strengthen the security of insurers’ investment and protect the interest of policyholders.

It has also identified nine sectors for making investment by the general insurance companies so that the companies can make investment in secured sectors for ensuring returns of investments of policyholders.

General insurance companies will also mandatorily have to invest 10 per cent of their premium income or the sum equivalent to their liabilities plus Tk 1 crore, which one is higher, in Bangladesh, the regulations said.

Net premium income and liabilities of an insurer will be considered as its asset. Outstanding instalment, furniture, equipment, stationary, abandoned goods and intangible assets will not be included in the definition of asset for the purpose.

The companies, however, will be able to invest the remaining amount either in Bangladesh or abroad, the regulations said, adding that they would have to take permission from appropriate authorities for making investment abroad.

According to the regulations, after making 7.5 per cent investment in the government securities, the insurers will be able to invest the remaining assets in some specified sectors, including keeping deposits with ‘A’ rated scheduled banks, in bonds issued for infrastructure development, debentures and securities issued by city corporations, debentures, mutual funds and unit funds approved by Bangladesh Securities and Exchange Commission, shares listed on stock exchanges, immovable asset located in city corporations and municipalities and in subsidiary companies.

The government securities include short-term and long-term securities such as treasury bills and treasury bonds.

The companies will be able to keep deposits up to 80 per cent of their assets with scheduled banks. The amount of deposits with a particular scheduled bank should not exceed 15 per cent of a company’s assets.

The amount of investment in bonds issued for development of physical infrastructure having government guarantee should remain within 15 per cent of the assets of an insurer.

A company will be able to invest 20 per cent of its assets in undisputed immovable assets located in the areas of city corporations and municipalities.

The regulations have also defined the liabilities of a non-life insurance company.

The liabilities include outstanding claims, 40 per cent of net premium related to fire, cargo and miscellaneous insurance business registered in Bangladesh, 100 per cent net premium related to aviation insurance, required money for giving proposed and undistributed dividends and payable taxes.

Paid up capital, provisions against bad and doubtful loans, provisions against investment and general provisions and depreciation funds will be excluded from the liabilities for this purpose.

A company will also have to submit a statement containing the total assets of the company to the IDRA after carrying out audits on investments.

It will have to submit investment returns to the regulator thrice a year within 21 days from the last day of March, June and September.

The IRDA will have authority to inspect the situation of assets of an insurer and take steps to check whether the company is complying with the regulations or not.

According to the IDRA, currently there are 48 non-life insurance companies in the country and the accumulated assets of the companies were Tk 11,293 crore in 2018.

Officials said that the companies kept the majority of the funds in scheduled banks.

But the companies are supposed to invest and preserve their assets as per the provisions of insurance act, they said.

The IDRA has formulated the regulations to enforce the provisions of the law, they added. 

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