The central bank has finalised the bancassurance guidelines, elaborating on how the banks would join the bandwagon.
All the stakeholders signed the guidelines at a ceremony at the Bangladesh Bank (BB) headquarters on Tuesday last, people familiar with the development told the FE on Thursday.
They added that the guidelines will now require approval from the Ministry of Finance (MoF).
The bancassurance, a partnership between the banks and insurers, is to promote insurance business through selling products to the bank clients.
Sources said similar other guidelines were being prepared by the insurance regulator, IDRA, which will also be submitted to the MoF shortly.
They expected that the insurance penetration that remained below 0.05 per cent of the GDP will dramatically improve after launching the bancassurance.
However, a bank will not be allowed to sign agreements with more than three life insurance and three non-life insurance companies at the same time, according to the guidelines.
The commercial banks will require establishing a separate and dedicated department or wing to procure the business through the model, under which bank customers will be the clients of the insurance products.
To get approval from the central bank, a bank will have to submit an extract of its board resolution in this regard along with the application.
The banks will also have to submit a copy of the signed bancassurance agency agreement(s) between the bank and insurer vetted by the legal retainers of the bank and the insurer.
And, the banks will apply for a corporate agent licence to IDRA upon receiving approval from the BB, and then notify the central bank accordingly with a copy of the licence as soon as it is received from IDRA.
The guidelines read that that bank will have to comply with all the regulations of IDRA for a continuation of the corporate agent licence.
The chief bancassurance officer will have to have a minimum masters or equivalent degree from any recognised university/ institute in Bangladesh which is also recognised by the University Grants Commission of Bangladesh or from affiliated universities abroad.
He will also have to have a minimum of 12 years of experience in banking and/or insurance companies.
The official status of the chief bancassurance officer will be within five grades below the chief executive officer (CEO) and/or managing director (MD) of the bank. He will have to possess necessary training and/or certification as required by the Insurance Development and Regulatory Authority (IDRA).
The bank, at the request of the insurer, will provide all necessary assistance in collecting the necessary documents and information regarding settlement of the claims.
"The insurer shall settle the claim directly with the insured person or nominee(s), whichever is applicable, under intimation to the bank," according to the guidelines.
"The bank will check the appropriateness of the insurance product for the client."
The commission on the insurance premium shall be agreed upon between the insurer and the bank as per their agreement conforming to regulations set by the IDRA.
In approving bancassurance, the bank shall meet the following criteria: a) capital to risk-weighted asset ratio (CRAR) with capital conservation buffer (CCB) not to be less than 12.5 per cent; b) shall meet the credit rating not less than Bangladesh Bank (BB) rating grade 2 defined at the Guidelines on Risk-Based Capital Adequacy [Revised Regulatory Capital Framework for banks in line with Basel III]; c) shall meet the minimum CAMELS rating of 2 of Bangladesh Bank; d) the level of net non-performing loans (NPL) shall not be more than 5 per cent; e) shall have a positive net profit for the last three consecutive years; and f) shall have a viable bancassurance business plan and review mechanism.
Bancassurance began in France in the 1970s. The neighbouring countries also introduced the same at least two decades back.
Bangladesh has now privately owned 34 life insurance and 45 non-life insurance companies. There are two more state-owned life and non-life entities.
Bangladesh has 60 commercial banks with around 11,000 branches across the country.