The government has made it mandatory for non-life insurance companies to invest at least 7.5 per cent of their assets in government securities.
The government securities include short-term and long-term securities such as treasury bills and treasury bonds.
At the same time, each non-life insurer will have to invest 10 per cent of their premium income or the sum equivalent to their liabilities plus Tk 10 million, which is higher of the two, in the country.
The Insurance Development and Regulatory Authority (IDRA) issued a new regulation having these mandatory provisions for non-life insurance companies in order to secure investment return of the policyholders.
The 'Insurance (Non-life Insurers' Assets Investment and Preservation) Regulations-2019', was issued through a gazette notification on November 14.
As per the rules, the companies can invest their remaining amount either in Bangladesh or abroad with prior approval from relevant government agencies.
After investing in government securities, the non-life insurers can invest their remaining assets in nine specified sectors.
The sectors include deposits in A-rated scheduled banks, bonds issued for infrastructure development, debenture and securities issued by city corporations, debenture, mutual funds and unit funds approved by the Bangladesh Securities and Exchange Commission (BSEC), shares listed with stock exchanges, immovable asset located at city corporations and municipalities and in subsidiary companies.
As per the regulation, non-life insurers will be able to invest a maximum of 15 per cent of their assets in the government infrastructure bonds or other bonds that are rated not below 'AA'.
Some 5.0 per cent of the assets of non-life insurance companies could be invested in debenture or other securities issued by city corporations.
They are also allowed to invest a maximum of 15 per cent of their assets in the BSEC-approved debenture.
The companies will also be able to keep up to 80 per cent of their assets in deposits in the scheduled banks. However, the amount of deposits to a particular bank should not exceed 15 per cent of assets of a company.
A non-life insurer will be able to invest 20 per cent of its assets in undisputed immovable assets located in the areas of city corporations and municipalities.
Also, total investment in shares of any company would not exceed 25 per cent of non-life insurer's assets. However, investment in Z-category shares would not be allowed.
The non-life insurance companies can also invest 2.0 per cent of their assets in residential property.
As per the regulation, liabilities of the non-insurers include outstanding claims, 40 per cent of net premium related to fire, cargo and miscellaneous insurance business registered in Bangladesh, 100 per cent net premium related to aviation insurance, required money for disbursing proposed and undistributed dividends and payable taxes.
Paid-up capital, provisions against bad and doubtful loans, provisions against investment and general provisions and depreciation funds will be excluded from the liabilities for this purpose.
A company will also have to submit a statement mentioning its total assets to the IDRA after carrying out audits on its investment.
It will have to file investment returns thrice a year within 21 days from the last date of March, June and September.
Talking to the FE, IDRA member Gokul Chand Das said the rules have been issued to ensure that the non-life insurers invest in government securities and in some priority sectors for the sake of national economy.
"In the previous regulations issued in 1958, no sector has been specified for their investment," he added.
Hailing the new regulations, president of the Bangladesh Insurance Association (BIA) Sheikh Kabir Hossain said IDRA has discussed the issue with them before framing the regulations.
Presently, there are 48 non-life insurance companies in the country and the accumulated assets of these companies stood at Tk 112.93 billion in 2018, according to IDRA.
IDRA officials said the companies kept bulk of their total assets in scheduled banks.