Insurance and Reinsurance Laws in Bangladesh
Leading Law Firm in Dhaka, Bangladesh | FM Associates
FM Associates, as a leading law firm in Dhaka, Bangladesh has significant experience in insurance and Reinsurance laws in Bangladesh and provides complex insurance coverage and analysis and scope coverage opinions under various insurance policies.
We maintain comprehensive insurance defence practice representing natural person and commercial separate legal entities.
FMA boasts of our roots in the insurance industry. We have represented major insurance companies of all types—small and large, local and international, insurers, reinsurers, etc. From coverage analysis and to claims handling to interpreting regulations and drafting policies, we have the knowledge and experience to handle all of your insurance-related needs.
Overview of the Insurance and Reinsurance Laws in Bangladesh
Prepared by Leading Law Firm in Bangladesh | FM Associates
Insurance is one of the imperative matters in today’s business world. In simple terms, insurance assists the entrepreneur and investor to secure the investment and alleviate unexpected loss. In consequence, insurance is ultimately promoting the business activity in a country, at the end which assists to secure a sustainable development in the economic growth.
As a developing country, in recent times, Bangladesh has attracted the eyes of foreign investor in numerous sectors. Thus, the importance of insurance has become inevitable in commercial transactions. Due to the ongoing demand in this sector, the government of Bangladesh has enacted several statues in this regard. The key statutes which govern the insurance issues in Bangladesh are Insurance Act 2010, Insurance Development and Regulatory Act 2010 and Insurance Corporations Act, 2019. Besides these Statutes, there are some Rules and Regulations which also regulate the insurance matters in Bangladesh.
The Insurance Development and Regulatory Authority/IDRA is central authority to regulate organizations connected with the insurance and reinsurance business. The Authority acts as the watchdog to promote the development of insurance industry in Bangladesh and also time to time recommend the Government in regards to the necessary development of the industry.
In Bangladesh, there are mainly 5 (five) types of insurances provided by the insurance companies:
a) Life insurance,
b) General Insurance,
c) Reinsurance,
d) Micro-insurance,
e) Islami insurance.
Relationship Between Insurer and Re-insurer and its effect on Beneficiary
The words “insurance” and “re-insurance” are most used words in commercial insurance transactions in Bangladesh. Both of these words have been defined in Insurance Act, 2010. As per the definition insurance means “insurance” means the business of entering into and carrying out policies and contracts, by whatever name called, whereby, in consideration of a premium received, a person promises to make payment to another person contingent upon the happening of an event, specified in the contract, on the happening of which the second-named person suffers loss, and includes reinsurance and retrocession including life insurance contracts. On the other hand “re-insurance” means a contract of insurance under which the insurer retains limited liability for his own interest by transferring the additional insured risk to one or more re-insurer(s) or to another insurer.
In plain language insurance refers to a situation, when a person undertakes the responsibility of a specific property in consideration of receiving of a certain amount. While, reinsurance indicates the circumstance, where the insurer has minimized his responsibility in respect to that specific property by reassigning some portion of the undertakings to a third person. The words insurance and reinsurance are interrelated with each other.
Important Insights about the Insurance Laws in Bangladesh
- The laws of Bangladesh have put a barrier to take insurance outside of Bangladesh against any property of interest vested in Bangladesh. However, the Insurance Development and Regulatory Authority has the discretion to remove this obstacle if it can show that the risk of the insurance cannot be covered in Bangladesh. Therefore, the beneficiary of the insurance policy in Bangladesh cannot get his insurance from any foreign insurance company without the permission of the Insurance Development and Regulatory Authority/IDRA.
- On the opposite view, any insurer by following certain rules and regulation may reinsure any liability in or outside of Bangladesh. The laws also put obligation to make insurance in respect of all non life insurance business with the Sadharan Bima Corporation which is the one and only state-owned non-life insurer and reinsurer in Bangladesh.
- In accordance to the provisions of Insurance Corporations Act, 2019, every insurer registered and carrying on insurance business in Bangladesh shall re-insure, on generally acceptable terms and conditions, such portion of his insurance business as he cannot retain on his own account. Fifty per cent of the re-insurable general insurance business shall be re-insured with the Sadharan Bima Corporation/SBC and the remaining fifty per cent of such business may be re-insured either with that Corporation or with any other insurer whether in or outside Bangladesh. The whole or any portion of the re-insurable life insurance business may be re-insured with any insurer outside Bangladesh.
- Hundred percent of all non life insurance business relating to any public property or to any risk or liability appertaining to any public property shall be underwritten with Sadharan Bima Corporation. After this Sadharan Bima Corporation shall retain Fifty percent of that insurance and shall distribute remaining fifty percent to all private non-life insurance companies equally under the Insurance Corporations Act, 2019. In here, “public property” shall mean any property movable or immovable which belongs to direct control, or the protection of which is the legal responsibility of the Government; any property vested to the government or a local authority; any company, firm, undertaking, institution, organisation or other establishment which is managed or controlled by the Government or a local authority or in which the Government, by itself or jointly with a local authority or company managed or controlled by it, holds controlling financial share or interest or where the government provides guarantee to finance a company; a foreign loan guaranteed by government or a project financed with external aid; any other property prescribed by the government.
- The laws of Bangladesh shall be applicable to any insurance policy in regards to the insurance matter carried out in Bangladesh, hence, any questionable issue in respect of premium, payment, benefits can be raised by the beneficiary before the competent court of Bangladesh, and the clauses of the policy shall not impose any hindrance to seek relief by the beneficiary before the court of Bangladesh.
- The laws of Bangladesh also provide an option for Alternative Dispute Resolution (ADR) in relation to the claims under life and non-life policies of small amount. The claimant/beneficiary may apply to the Insurance Development and Regulatory Authority for any disputes in regards to any matter of the policy for settlement under the Insurance Act 2010. The Authority after hearing the concerned parties and taking relevant evidence may settle the dispute. The decision provided by the Authority in this regard shall be final, hence, cannot be called before the Court of law.
Being a commercial hub for international business, the Government of Bangladesh has taken many initiatives to give utmost protection to the parties of insurance business transaction. The government is reluctant to open the floodgate to take insurance from foreign companies. However, the government has taken the complete opposite approach in regards to re-insurance. The easy access to justice in regards to any dispute by way of ADR or traditional court system also ensures the rights of the beneficiaries.