Insurance

CT 1

Question: What would be the capital structure as per schedule 1 (2010)

SCHEDULE-1
(See section 21, 23, 118, and 119)
Capital and Deposit
1. Minimum Paid-up Capital under section 21:
(a) For Life Insurance Business:
o (i) Companies incorporated in Bangladesh:
▪ At least Taka 30 crore,
▪ 60% to be subscribed by the sponsors,
▪ 40% open for public subscription.
o (ii) Companies incorporated outside Bangladesh:
▪ At least Taka 30 crore deposited in Bangladesh through fund transfer
from abroad.
(b) For Non-life Insurance Business:
o (i) Companies incorporated in Bangladesh:
▪ At least Taka 40 crore,
▪ 60% to be subscribed by the sponsors,
▪ 40% open for public subscription.
o (ii) Companies incorporated outside Bangladesh:
▪ At least Taka 40 crore deposited in Bangladesh through fund transfer
from abroad.
2. Deposit Required under Section 23:
o (a) Life Insurance Business: Taka 1 crore 50 lac.
▪ Companies registered before the Act must deposit within 3 years from
commencement.
o (b) Non-life Insurance Business: Taka 2 crore 50 lac.
 ▪ Companies registered before the Act must deposit within 3 years from
commencement.
3. Working Capital of a Co-operative Insurance Society under Section 118:
o Taka 2 crore 50 lac.
o If not available, must increase to the required amount within 5 years of the
Act's commencement.
4. Working Capital of a Mutual Insurance Company under Section 118:
o Taka 1 crore 50 lac.
5. Deposit to be Maintained by a Co-operative Insurance Society under Section 119:
o Taka 2 crore 50 lac.
o Must be deposited within 3 years of the Act's commencement.
6. Deposit to be Maintained by a Mutual Insurance Company under Section 119:
o Taka 30 lac.

Question: What are the rules regarding preparation and presentation of

balance sheet, profit and loss account, revenue account and executive
report according to insurance act (2010)?
According to the Insurance Act, 2010 (Bangladesh), the rules regarding the preparation
and presentation of the balance sheet, profit and loss account, revenue account, and
executive report are primarily outlined in Section 27 and related provisions. Here's a
detailed breakdown:

Preparation and Presentation of Financial Statements

1. Mandatory Annual Preparation (Section 27(1))

Every insurer transacting insurance business in Bangladesh must prepare annually, at the
end of each calendar year, the following:
• (a) Balance Sheet
o To be prepared in the form and manner prescribed by regulations.
• (b) Profit and Loss Account
o To be prepared according to tables set forth in the regulations.
• (c) Revenue Account
o Specific to the class or sub-class of insurance business.
o Must follow the regulations regarding form and content.
• (d) Executive/Management Report
o A statement containing names and designations of all individuals managing
the business.
o Must include a report on their business activities during the reporting year.

2. Signatures Required (Section 27(2))

• If the insurer is a company:
o Signed by the Chairman, two directors, and the Chief Executive Officer
(CEO).
• If the insurer is a co-operative society:
o Signed by two members of the society.

3. Separate Accounts for Different Business Classes (Section 26)

• Insurers must keep separate accounts of receipts and payments for each class/sub-
class of insurance.
• For life insurance business, all receipts must be deposited into a "Life Insurance
Fund".
• That fund must:
o Be used only for life insurance liabilities.
o Be reported annually to the Authority with auditor certification.

4. Filing Requirements (Section 32)

• Printed copies (4 sets) of the balance sheet, profit and loss account, revenue account,
and executive report must be submitted to the Insurance Development and
Regulatory Authority (IDRA) within:
o 6 months from the end of the calendar year (extendable by 1–3 months under
special conditions).
• Signatures:
o 1 set must be signed as per Section 27(2).
o Another must be signed by the auditor or actuary responsible.
 5. Compliance with Regulations
All formats, content, and presentation standards for these documents must comply with
regulations made under the Act (which are typically prescribed by IDRA through official
notifications).

Here’s a simplified version of the definitions mentioned in Chapter I (Preliminary) of the

Insurance Act, 2010:

Simplified Definitions from Chapter I – Insurance Act, 2010

1. Approved Auditor
→ An auditor officially appointed by the insurance authority.
2. Approved Investments
→ Investments selected and approved by the government.
3. Approved Security
→ Safe investments like government bonds or securities guaranteed by the
government.
4. Participating Policies
→ Life insurance policies where the policyholder shares in the company’s profits.
5. Financial Institution
→ A company like a bank or finance company as defined by the Financial Institutions
Act.
6. Electronic Media
→ Tools like the internet, mobile, TV, CDs, etc., used for communication.
7. Islamic Insurance Business
→ Insurance based on Islamic Shariah law.
8. Actuary
→ A specially qualified professional who calculates insurance risks and premiums.
9. Employer of Agents
→ A person who hires others to sell life insurance on behalf of a company.
10. Authority
→ The Insurance Development and Regulatory Authority (IDRA), which regulates
insurance.
11. Company
→ A business entity registered under the Companies Act.
12. Company Act
→ The Companies Act of 1994.
13. Continuous Disability Contract
→ Insurance that pays if a person dies, gets injured, or falls seriously ill.
14. Schedule
→ A section attached to the law that lists specific details.
15. Scheduled Bank
→ A bank listed by the Bangladesh Bank as authorized.
16. Encumbrance
→ A legal claim on property like a mortgage or pledge.
17. Registration
→ Official approval to operate insurance business.
18. Family
→ Includes spouse, parents, children, and dependent siblings.
19. Policy
→ The contract of insurance between the company and the insured person.
20. Re-insurance
→ When an insurance company transfers part of its risk to another insurer.
21. Retrocession
→ When a re-insurance company shares its risk with another company.
22. Certified Document
→ A document confirmed as a true copy by the company’s CEO.
23. Regulations
→ Official rules made under this Act.
24. Rules
→ Legal procedures made under this Act to implement its sections.
25. Insurer
→ A company or organization that provides insurance services.
26. Policyholder
→ A person who buys or holds an insurance policy.
27. Policyholder’s Liability
→ The insurer’s responsibility to pay under the terms of a life insurance policy.
28. Insurance
→ A promise to pay money if a certain loss (like accident, death) happens, in return
for a fee (premium).
29. Insurance Agent
→ A person licensed to sell insurance and earn commission.
30. Insurance Surveyor
→ A licensed person who checks the extent and cause of damage for claims.
31. Manager
→ As defined under the Companies Act, a person who manages company affairs.
32. Person
→ Any individual or organization.
33. Broker
→ A licensed middleman who helps customers find insurance from companies.
34. Managing Agent
→ A person or company allowed to manage a business on behalf of the company.
35. Government Security
→ Government-issued bonds or financial instruments.
36. Cooperative Society Act
→ The law that governs cooperative societies (Act of 2001).
37. Solvency Margin
→ The extra money a company must keep to show it can pay claims.
38. Subsidiary Company
→ A company controlled by another company.
39. Auditor
→ A qualified person who reviews company accounts.
40. Other Terms
→ Any term not defined here will follow the meaning in the Companies Act, 1994.

1. Insurance:
Insurance is a way to protect against financial loss by transferring risk to an insurer in
exchange for a payment.
2. Risk:
Risk is the chance that something harmful or unexpected may happen.
3. Hazard:
A hazard is anything that increases the chance of a loss happening.
4. Peril:
A peril is the actual event that causes a loss, like a fire or accident.
5. Insurer:
An insurer is a company that provides insurance and agrees to cover certain risks.
6. Premium:
A premium is the amount of money paid regularly to the insurer for coverage.
 7. Policy:
A policy is the written contract that explains what the insurance covers.
8. Policyholder:
A policyholder is the person or organization that owns the insurance policy.
9. Broker:
A broker is someone who helps people find and buy insurance from different
companies.
Example: A fire damages a house due to faulty wiring.
• Risk: The chance that a fire could happen and cause damage to the house.
• Hazard: The faulty electrical wiring, which increases the chance of fire.
• Peril: The fire itself, which is the cause of the damage.
• Loss: The actual damage to the house and property caused by the fire.
So, risk is the possibility, hazard increases that possibility, peril is what actually happens,
and loss is what gets damaged or destroyed.