Regulatory body suggests mandatory solvency margin for insurance cos
Tuesday, 19 April 2011
Asaduzzaman Pallab
The regulatory authority has suggested mandatory requirement of a 'certain' solvency margin for operating insurance business in the country. At per the suggestion, the solvency margin should be calculated on the basis of gross premium incomes of insurers or settlements of claims by them, sources close to the recently-formed regulatory authority said. In a proposal sent to the ministry of finance the Insurance Development and Regulatory Authority (IDRA) said insurers should maintain minimum paid up capital or solvency margin whichever is higher for the sake of policy holders' security. The new insurance law, 2010 has fixed up general insurance companies' minimum capital at Tk 400 million and Tk 300 million for life insurance companies. Solvency limit will be calculated on the basis of different things for life and non-life insurance companies. When contacted over the issue chairman of the newly formed IDRA, Actuary Shefaque Ahmed told the FE that insurance companies must maintain the higher one-- minimum paid up capital or solvency limit-- to protect the interest of policy holders. By elaborating the fact insurance boss said, for example if a particular insurance company's paid up capital is Tk 450 million and its solvency limit is calculated at Tk 500 million then the company has to raise its paid up capital to Tk 500 million. Besides, IDRA has sent the idea of solvency limit to the stakeholders of insurance sector seeking their observations. At present there are 17 life and 43 non-life companies operating in the country. The chairman of IDRA told the FE that the insurance companies have to calculate their solvency margin immediately after ministry's approval to the proposal. "If any insurance company fails to fix up its solvency limit on a urgent basis administrator will be appointed in that particular company" he added. Welcoming the move Managing Director of Sandhani Life Insurance Company Ahsanul Islam Titu said: "It is a positive initiative. The margin limit should be fixed based on the amount of business of the respective companies." He, however, said the timeframe for the compliance of the solvency margin limit should be flexible for insurers. But the insurance companies will get opportunity to raise their paid up capital within a certain period of time, source said. IDRA made their proposal about solvency limit on the basis of a seven-member expert committee's suggestion over 'rules and regulations' for the insurance sector. The rules and regulations will determine how the newly enacted 'Insurance law' will be enforced. A project headed by Chairman of Jiban Bima Corporation Dr Mohammad Shohrab Uddin Ali prepared the recommendations on insurance rules and regulations. Shefaque Ahmed said after getting recommendations from the expert committee IDRA gave the finishing touch to the rules and regulation and finally sent the proposals to the ministry.
The regulatory authority has suggested mandatory requirement of a 'certain' solvency margin for operating insurance business in the country. At per the suggestion, the solvency margin should be calculated on the basis of gross premium incomes of insurers or settlements of claims by them, sources close to the recently-formed regulatory authority said. In a proposal sent to the ministry of finance the Insurance Development and Regulatory Authority (IDRA) said insurers should maintain minimum paid up capital or solvency margin whichever is higher for the sake of policy holders' security. The new insurance law, 2010 has fixed up general insurance companies' minimum capital at Tk 400 million and Tk 300 million for life insurance companies. Solvency limit will be calculated on the basis of different things for life and non-life insurance companies. When contacted over the issue chairman of the newly formed IDRA, Actuary Shefaque Ahmed told the FE that insurance companies must maintain the higher one-- minimum paid up capital or solvency limit-- to protect the interest of policy holders. By elaborating the fact insurance boss said, for example if a particular insurance company's paid up capital is Tk 450 million and its solvency limit is calculated at Tk 500 million then the company has to raise its paid up capital to Tk 500 million. Besides, IDRA has sent the idea of solvency limit to the stakeholders of insurance sector seeking their observations. At present there are 17 life and 43 non-life companies operating in the country. The chairman of IDRA told the FE that the insurance companies have to calculate their solvency margin immediately after ministry's approval to the proposal. "If any insurance company fails to fix up its solvency limit on a urgent basis administrator will be appointed in that particular company" he added. Welcoming the move Managing Director of Sandhani Life Insurance Company Ahsanul Islam Titu said: "It is a positive initiative. The margin limit should be fixed based on the amount of business of the respective companies." He, however, said the timeframe for the compliance of the solvency margin limit should be flexible for insurers. But the insurance companies will get opportunity to raise their paid up capital within a certain period of time, source said. IDRA made their proposal about solvency limit on the basis of a seven-member expert committee's suggestion over 'rules and regulations' for the insurance sector. The rules and regulations will determine how the newly enacted 'Insurance law' will be enforced. A project headed by Chairman of Jiban Bima Corporation Dr Mohammad Shohrab Uddin Ali prepared the recommendations on insurance rules and regulations. Shefaque Ahmed said after getting recommendations from the expert committee IDRA gave the finishing touch to the rules and regulation and finally sent the proposals to the ministry.