LAW200: Legal Environment of Business

Group Report
on
Insurance law of Bangladesh

Prepared For:
Arafat Hosen Khan (KAH)
Barrister at Law and Advocate, Bangladesh Supreme Court

Prepared By:
Md Salauddin Imran, 1911371030
S.M. Ishrak Ashiq, 1911997030
Salima Mahmudi Sara, 1822080030
Saika Rahman, 1822084630

1
2
 Introduction
Insurance law is the law that involves insurance along with insurance policies and claims.
Insurance law can be broken down into three categories that include, regulation of business of
insurance, regulation of the content of insurance policies and the regulation of claim handling
(Wikipedia, 2019). Insurance business was running at full pace in Bangladesh from the times of
British rule of India, therefore, insurance needed to be regulated. Before there was the Insurance
Act 1938 (Act IV of 1938). At present the law is the Insurance Act 2010 (Act no. XIII of 2010)
that is, an Act to re-enact and consolidate the Insurance Act 1938. Not only this Act, the updated
law, that is, the Insurance Act 2010 repealed all past laws that were related to insurance. This Act
also suggests the actions to be taken regarding the insurer and the insured and also the
punishment for breaking the law. It also includes actions for Islamic Insurance. It includes the
Insurance Development and Regulatory Act 2010, that is, it controls the functions of insurance
companies. These functions may include investments, taxation and reporting. Some other
insurance of business-related laws is included in the Insurance Act 2010. These laws include,
The Financial Insurance Act 1993, The co-operative Societies Act 2001, The Government
securities Act 1920 and The Companies Act 1994. The Insurance Act 2010 suggests, in section
5, that there can be two types of insurance business that are Life Insurance and Non-Life
Insurance ( Insurance Act 1938).

The Insurance Act 2010 is enacted in a particular way that firstly includes chapter I, under which
is the Preliminary. It says that the law should have a short title and commencement that is the
Act can be called the Insurance Act, 2010 and it should commence all at once. Then there are 40
definitions that include the definitions of Insurance, Actuary, and Auditor etc. Chapter II
includes Provisions Applicable to Insurers under which there is the Act applicable to the insurers
while liabilities remain unsatisfied, restriction on the operations of both insurance and re-
insurance businesses, different types of insurance businesses, insurance business in rural or
social sector and the continuation of Islamic insurance businesses also. Then there is the
Registration of the Insurers that includes obtaining, issuing, suspension and renewal of the
registration certificate. It also says that alterations for registration are to be reported, there are
restrictions on registration of the same insurer and licensing needs to done for a branch and an
office of the insurer. There are also restrictions on the name of the insurer. Then there is
Premium, Insurance and Re-insurance which sees whether the premium rates are appropriate or
not, and how these rates should be collected and also information about insurance and re-
insurance abroad. Then comes Capital and Deposits part, that includes capital requirement,
shareholdings, foreign sponsor’s share and reserve and refund of deposits.

The part of Accounts, Audit, Actuary Report and Returns firstly suggests that the insurer shall
keep the accounts of all receipts and payments based on the class of insurance business. Also, the
insurer has to deposit all receipts due to a separate fund. This shall be in the case of life insurance
business. There are requirements of preparing financial statements at the end of each financial

3
year by insurers. These are subject to audits and sometimes special audits including more than
one auditor. In an actuary report the insurer of a life insurance company is required to conduct an
investigation by an Actuary about the financial condition of it. It also involves the submission of
returns. Chapter III, IV, V, VI and VII include Mutual Insurance Companies and Co-operative
Insurance Societies, Intermediaries, Offences and Penalties, Miscellaneous and Repeal and
Savings respectively. In this report on Insurance Law we are going to focus on the particular part
of chapter II that is; Accounts, Audit, Actuary Report and Returns. This will be discussed further
and in more detail.

ACCOUNTS, AUDIT, ACTUARIAY REPORT AND RETURNS

This part of the Act consists of 17 sections and several sub-sections. All the sections are
described below with sub-section included in the writing as whole, the sections are 26-42 from
the actual Act (Insurance Act, 2010).
26) Separate accounts and funds:
According to this Act the insurer must keep all the records and use separate accounts of the
business of any manner. For life insurance business the receipts must be deposited in a separate
insurance fund. As stated earlier the deposited money and assets should be places and certified
by the auditor within six months. And the life insurance fund must be user for the only purpose
for which it is deposited.
27) Account, balance-sheet, etc.:
An insurer must create the following statements after the end of the year which includes
transaction of money in Bangladesh only: a balance sheet, profit and loss, a revenue account and
a statement containing the names and details of the involved individuals. These documents
should be signed and approved by the company chairman, two directors and CEO or if the
company is cooperative society then signed by two of the members of the company.
28) Audit:
Balance-sheet, profit and loss, revenue which are transacted in Bangladesh must be audited by
auditors and the auditor chosen for such task must have the power to perform the function vested
in Auditors under section 23 of the Company Act.

4
29) Special Audit:
In spite of anything, the authority must have the record, documents and transactions of all the
insurance companies carrying on insurance business in BD, audited by Auditors in time intervals
with a restriction that the auditor for this section of any year can’t be the same for the section 28
(Audit). The auditor appointed for this section has the total right to examine all records and
documents of the insurer related to insurance business and can even call for any more documents
if he needs. The Auditor for this section has to prepare a report every four months since the date
of his appointment and will be paid by the insurer for doing such work.
30) Actuary report and abstract:
There should be once an investigation carried out by the Actuary regarding Financial conditions
which includes all the liabilities according to the prescribed order. Provided that the investigation
must be done within two years from the previous investigation. The investigation result should
be made public. There should be a certificate signed by the CEO of the insurer that full and
accurate particulars of every policy under which there is a liability which can be actual or
contingent have been furnished to the actuary for the save of investigation. There should be a
statement attached to every abstract in agreement with the regulation in respect of the ife
insurance business at the date in which the accounts of the insurer are made for the purpose of
abstract, provided that the the investigation are made annually by the insurer and the statement
need not to be affix every year but once in every three years. The investigation of the financial
condition must be made with the vaild account which is of the same year of the investigation.
This section is also applicable for accident and health insurance business; provided that if the
Authority is satisfied that the number and amount of transactions carried by an insurer in health
insurance business is small. The valuation of liabilities which is to made with authentic reserves
and that the original is not manipulated.
31) Register of policies and claims:
Any insurance provider transacted by him in Bangladesh in respect of the insurance company
shall maintain a register of all policies and claims in the manner specified by the regulations.
32) Submission of returns:
The accounts and balance sheet and audited accounts of liability report, the abstract and
statement shall be printed and four copies shall be furnished as returns to the Authority in the
case of the accounts, balance sheet under section 27 and section 300 within six months and in
case of liability valuation report, the abstract and statement referred to section 30 within nine
months from the end of the period to which they refer. Out of the four copies so furnished under
this section, one shall be signed, in the case of a company, by the chairman and two directors and
by the Chief Executive Officer of the company and, if the company has a managing director by
that director, in the case of a co-operative society, by two of its members; and one copy shall be
signed by the auditor who made the audit or the actuary who made the valuation. Insurer needs to
appeal the Authority with the documents stated in section 27, balance-sheet, profit and loss
account, revenue account and valuation reports, if his business or residence resides outside

5
Bangladesh. Supposedly these documents are not required by the Authority of a country, then an
auditor must verify a statement showing total assets and liabilities, total income and expenses
must be submitted. Not doing so will identify the insurer as “public-interest body” as explained
in section 2.
33) Exemption from certain provisions of the Company Act:
Unless it is not inconsistent with the Company Act, where an insurer, a corporation incorporated
under the Corporation Act or any other Act thereby repealed, shall furnish its balance sheet and
accounts in compliance with Section 32 in any year At the same time, it may send copies of these
balance sheets and accounts to the Registrar of Companies and, where such copies are thus sent,
it is not mandatory for the Company to file copies of the balance sheet and accounts with the
Registry, as required by the Company Act; Such copies shall be subject to the same charge and
shall be dealt with in all respects as if they had been submitted in compliance with the above
article.
34) Furnishing reports:
Every insurer shall immediately send to the insurer's shareholders or policy-holders a certified
copy of the report on the affairs of insurance company to the Authority.
35) Abstract of proceedings of Annual General Meetings:
A certified copy of the minutes of the proceedings of each general meeting shall be given by
each insurer to the Authority as reported in the Minutes of the Insurer's Book within 30 days of
the meeting to which it relates.
36) Custody and inspection of documents and supply of copies:
Every return placed to the Authority must be kept by the Authority and it may remain open for
inspection, anyone can produce a copy of it. Any provisions according to section 32 must be on
application of shareholder made within two years, be supplied to him by the insurer within
fourteen days where the insurer is incorporated, registered and domiciled in Bangladesh and in
case of other insurers within one month of such application.
37) Powers of Authority regarding returns:
If the Authority finds any return misleading or faulty then under this Act the Authority may call
for further information from the insurer as it may be used to correct the supplement or call upon
the insurer to submit for its examination at the principal place of business of the insurer in
Bangladesh any book of account, register or other document or to supply any statement which it
may specify in a notice served on the insurer for the purpose, examine any officer related to such
work and decline to accept such return. If the Authority declines to accept the return then the
insurer has failed to furnish returns in accordance to section 32.

6
38) Power of Authority to order revaluation:
If the Authority finds any defective procedure is being followed then the Authority may call for a
reinvestigation according to section 32 and give another opportunity to the insurer. A timeline to
maintain which must be within three months as per the Authority. As per the section 30 and 32
the abstract and the statement prepared as the result of such investigation be furnished by the
appointed date.
39) Evidence of documents:
It will only be considered as a return if the return is certified by the Authority. The insurer should
have a copy of the accepted return as an evidence to prove there was an original return unless
some variations between the returns have been proves
40) Returns to be published in statutory forms:
According to these insurers should not make any calculation or statement that misreports a policy
that has been issued or will be issued. It must also not misstate any form of benefit that has been
promised. The name of the insurer and the policy should be accurate that will represent the true
nature of the policy and also the financial condition of the insurer should not be misrepresented.
The insurer should never spread any untrue information or statement about anyone in the
insurance business by using any form of publication, notice, pamphlet etc. Provided, nothing in
this section will stop the insurer from publishing any return in a form in which it has been
furnished to the Authority.
41) Investment of assets:
All the insurers should invest and maintain assets according to the regulations and the Authority
should power to regulate the investment. Provided, there is no investment is allowed in the first
issue of capital by a business, and where the directors of the insurers or any family member of
the director has a interest as owner, partner, director, manager or managing agent. All insurers
also should submit a return on investment under sub-section (1) according to regulations.
42) Subsidiary Companies:
The insurers might be allowed by the Authority to form one or more subsidiary companies
because they may help the promotion and development of insurance business mainly. According
to sub-section (1), insurers should not hold shares in any company that surpasses the amount
outlines by the regulations.

7
Insurance Law in Bangladesh provides a guideline about all the details, rules and regulations to
be followed to both implement the Insurance contract and get the full benefit from it. Moreover,
the judgments that the Supreme Court of Bangladesh had provided under The Insurance Act
1938 has improved the entire legal field if Insurance. For example, the conundrum of a person
being insured or not had risen in the case of Janata Insurance Co. Ltd. Appellant vs Islam Steel
Mill Limited and Anotherr. In this case the court said that, “the policies were owned by the
plaintiffs and the premiums were paid out of their accounts, and thus the plaintiffs being the
beneficiaries of the policies are legally entitled to claim the moneys covered by the policies
under section 46 of The Insurance Act 1938.” In this case the law focuses on the premium payers
and they are rightfully given their benefits (Editorial, 2017, March).
Conclusion
Insurance has started to play an integral part in Bangladesh’s economy; therefore, Insurance Law
also needs to play a part to ensure the protection of both the people and particularly the society as
a whole. Insurance is a contract where the insured has to pay a premium to be insured and the
insurer is the one to offer the contract in the first place. Ultimately it is a way of compensating a
person who is said to be insured. For example, a person who insured a building to lessen the risk
of a fire, will be paid the policy money if a short circuit causes the building to be destroyed.
Insurance law (The Insurance Act 2010) outlines the details involving both the insurer and the
insured and takes into consideration all that can happen in the case of the contract that is
Insurance and provides information of what should be done in every situation regarding the
Insurance contract.

The Insurance Act 1938 was repealed by the ‘The Insurance Act 2010’ and it can be said that it
has not only changed Insurance Law in Bangladesh but also added new and important features.
Some important additions in this new Act which were missing in the previous Act include;
creation of new regulatory authority, legal framework of Islamic Insurance and micro Insurance
business. Some significant changes may include; capital requirements, spread of business in rural
areas, reinsurance abroad, penalty under the new Insurance Law lastly provision of foreign
investment. Thus, we can say that The Insurance Act 2010 was a vast improvement from The
Insurance Act 1938 and a much needed one and it was key for Insurance Law in Bangladesh
(Editorial, 2017, March).

8
 References

Editorial, 2017, March, INSURANCE LAW IN BANGLADESH, A Comparative Study On

Insurance Act 1938 And Insurance Act 2010 Retrieved from https://bdjls.org/a-
comparative-study-on-insurance-act-1938-and-insurance-act-2010/3/

Editorial, 2017, March, FEATURES OF INSURANCE ACT, 2010, A Comparative Study On

Insurance Act 1938 And Insurance Act 2010 Retrieved from https://bdjls.org/a-
comparative-study-on-insurance-act-1938-and-insurance-act-2010/4/
Insurance Act, 2010, Retrieved from:
https://idra.portal.gov.bd/sites/default/files/files/idra.portal.gov.bd/law/ae93f691_281b_4
efb_998d_d5462025f99e/Insurance%20Act%202010%20english%20version.pdf?
fbclid=IwAR2xVaNs6oX_T8IG2fGQBudcEIm0H-
_sIqYM8EVrW_uiuB4d8A33so48Z4g
Insurance Act 1938, Laws of Bangladesh, Retrieved from http://bdlaws.minlaw.gov.bd/act-
details-175.html
Wikipedia, 2019, Insurance Law, Retrieved from https://en.wikipedia.org/wiki/Insurance_law