Life insurance companies operating in the country must invest assets equal to their liabilities in the nine priority sectors determined by the government, according to the new regulations of Bangladesh Insurance Development and Regulatory Authority.
The companies will mandatorily have to invest at least 30 per cent of their assets in government securities, said the regulations titled Insurance (Life Insurers Asset Investment) Regulations-2019.
The IDRA on November 18 issued the regulations to protect the interest of policy holders through strengthening the security of investment of the insurance companies.
According to the regulations, assets include invested and investment worthy money equal to liabilities of the insurers.
Liabilities against life insurance policies as per actuarial evaluation, required money for payment of unpaid demands against policies, proposed dividend and policy bonus, undistributed dividend and policy bonus, payable amount to reinsurers and others and payable revenue to the government will be included in the liabilities.
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.
Outstanding instalment, furniture, equipment, stationary, abandoned goods and intangible assets such as reputation and patent rights will not be included in the definition of asset for the purpose.
According to the regulations, the companies will be allowed to invest their additional assets beyond liabilities within the country or abroad after taking prior permission from the competent authorities of the countries.
The regulations also determined nine sectors for investment of the remaining 70 per cent of the assets after making investment of 30 per cent in the government securities by the companies.
The government securities include short-term and long-term securities such as treasury bills and treasury bonds.
A life insurance company will be able to keep deposits up to 60 per cent of its assets with ‘A’ rated or higher rated scheduled banks. The amount of deposits with a particular scheduled bank should not exceed 10 per cent of a company’s assets.
The company will be able to keep 10 per cent of its assets as fixed deposits with financial institutions selected by the government.
It will also be able to invest 15 per cent of its assets in bonds issued for development of physical infrastructure having government guarantee and other bonds with rating ‘AA’ or above.
Some 10 per cent of assets could be invested in debenture or securities issued by city corporations with approval of the government and in debenture approved by the Bangladesh Securities and Exchange Commission.
A company will also be able to invest 25 per cent of its assets in ordinary shares or preferential shares of companies, except ‘Z’ category scrips, approved by the BSEC and listed on any stock exchange of the country.
A life insurer 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 rate of investment in mutual funds and unit funds will be within 20 per cent of the total assets of the company.
The companies will have to submit statements containing the amount of assets in prescribed format within 30 days of completion of audits on investment for the period up to December of previous year.
It will have to file investment returns thrice a year within 21 days from the last day of March, June and September.
According to the IDRA, currently there are 32 life insurance companies in the country and the accumulated assets of the companies were Tk 38,710 crore in 2018.
Earlier, most of the companies used to keep their money in the scheduled banks as the sectors of investment were not well defined in the previous rules framed in 1958.
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