Govt gives mind to insurance reform agenda for ADB loan

---

Jasim Uddin Haroon
The government took moves to reform the country's insurance sector in compliance with conditions of the Asian Development Bank (ADB) for the first tranche of the US$ 300 million credit support.
Disbursement of the credit from the Manila-based lender became uncertain following delays in setting a timeframe for reform measures in the country's one of the key financial sectors.
The ADB in earlier negotiations with the Economic Relations Division (ERD) under the Ministry of Finance gave the government until September 30 last to take reform steps in the insurance sector for the first tranche of the credit support.
The Insurance Development and Regulatory Authority (IDRA), the country's insurance regulatory body, wrote to the ADB in this connection on September 26 last.
A senior official at the ERD told the FE: "We may get the loan as we've taken a move to reform the insurance sector."
The ADB board might approve the loan in its meeting in the current month.
The conditions of the lending organisation require the authorities to submit a white paper to the cabinet on strengthening the insurance sector by agreeing on a timetable for recapitalising all the insurance companies in accordance with the insurance act of 2010.
The conditions also provide for independence of the IDRA, management of the IDRA fund, formulation of a central rating committee, obligations of insurers to the rural and social sectors and other reforms.
The ADB also wants finalisation of rules under the insurance act of 2010.
The government also agreed on the conditions.
The ERD official said the government is willing to provide the IDRA with complete operational independence as pursued by the ADB.
"As per the government decision, it will take place in 2013 -14," he added.
The government wants to revise the capital adequacy rules for the insurers, but it will do it by 2015.
When it comes to Sadharan Bima Corporation (SBC) and Jiban Bima Corporation (JBC) on a sound commercial footing, the government wants to provide the two entities with operational independence.
The government wants to settle issues pertaining to actuarial and technical personnel by 2015.
It agreed with the ADB about assisting the industry in a more professional approach to product development and product pricing.
It agreed on implementation of standardised reporting templates and electronic data exchange and a screen-based monitoring system at the IDRA.
Earlier on September 05-06, the government completed negotiations on the loan.
The loan will be disbursed in two equal installments on fulfillment of 28 conditions.