The Insurance Development and Regulatory Authority (IDRA) has relieved 12 of the 17 directors of Swadesh Islami Life Insurance Company, including its chairman, of their duties over allegations of embezzling fixed deposits and breaching the insurance act.

The order comes into effect from January 4, when seperate letters signed by Abdul Majid, IDRA director for law, were sent to the directors.

The remaining directors will now have to run the company and simultaneously work to form a new board, Zahangir Alam, spokesperson of IDRA, told The Daily Star on Monday.

The accused directors include the chairman, Maksudur Rahman and vice-chairman Shahidul Ahsan. Others named are Nurul Alam Chowdhury, Baharul Ahsan, Marjanur Rahman, Farah Ahsan, ABM Abdul Mannan, Shamsun Nahar Rahman, Ferojul Ahsan, Kamrul Ahsan, Mohammad Manjurul Islam and Madina Tun Nahar.

The company took a loan of Tk 14.30 crore from NRBC Bank against a fixed deposit of Tk 13.05 crore, which was the company's paid-up capital, according to the IDRA letter.

However, as per Insurance Act 2010, paid-up capital has to be kept free of liability.

Moreover, the loan was not shown in the balance sheet, so it appears that it was allegedly embezzled, the letter added.

In a letter sent on December 4, 2023, IDRA sought explanations by December 11 to justify why the accused should not be relieved of their duties.

The accused had not provided a response.

Another letter, sent on January 4 this year, stated that the activities of the accused proved to be harmful to the company and policyholders.

Maksudur Rahman could not be reached for the comment.

The insurer's chief executive officer, Mohammad Jamal Uddin, said the remaining board members would have to resolve the crisis.

He declined to comment on the alleged embezzlement, saying it was now a legal matter.

IDRA passes instructions to form the new board on January 9, he added.

A senior IDRA official, on condition of anonymity, said NRBC Bank informed them about the loan two-three months ago after which IDRA initiated an investigation.

The Tk 14.30 crore loan has been taken in phases since 2014, when the company was formed, said the official.

A letter was also sent to the Bangladesh Bank governor recently seeking necessary steps against NRBC Bank, as it had approved the loans without due diligence, added the official.

Meanwhile, Swadesh was one of five insurers which IDRA, through a letter sent on December 19 last year, had asked not to spend any income from premiums, investments and life funds unless policyholders' claims were settled by the end of 2023.

"Despite repeated instructions to pay insurance claims, there has been no improvement in the settlement of claims of the company," read the letter.

An IDRA official told The Daily Star that the major hurdle behind claims remaining unsettled at Swadesh was a lack of willingness and an ongoing liquidity crisis.

Swadesh settled 50 percent of its total claims in 2020, which fell to 48.15 percent in 2022, according to an IDRA document.

It settled 37 percent of claims until the third quarter of 2023, paying Tk 31 lakh against claims amounting to Tk 86 lakh, it said.