Insurers shall not assist company directors, shareholders, their families or other related individuals in obtaining loans from financial institutions by using company assets as collateral, according to a draft amendment to Insurance Act 2010.

The Insurance Development and Regulatory Authority (IDRA) has taken this initiative as a part of its efforts to develop the insurance sector by ensuring proper safeguarding of the interests of policyholders.

Additionally, the IDRA aims to amend certain provisions that are in conflict with other laws in order to streamline operations in the industry.

As such, the insurance regulator seeks to amend a total of 50 sections of the act.

The IDRA prepared its proposals for amendment, addition and deletion of existing guidelines after reviewing the opinions of various stakeholders while also taking into consideration the laws of other countries.

The draft of the law containing the amendments was then published on the IDRA website on March 28, with the IDRA seeking further insight from experts and the public on the proposed measures by April 24.

However, the IDRA will move forward with its current plan if no objections are made within the stipulated deadline.

Copies of the draft have also been sent to the president of Bangladesh Insurance Association, managing directors and chief executive officers of life and non-life insurance companies, president of Bangladesh Insurance Forum, and director of Bangladesh Insurance Academy.

Md Zahangir Alam, director of the IDRA's non-life department alongside its spokesperson, said the law was enacted about 13 years ago and has become outdated as the industry has changed a lot since then.

 "There is a need for clarification in some sections to make the law universal and time-befitting. Besides, there are many issues in the industry that are not covered by existing regulations," he added.

Alam also said there is a need to add a slew of new clauses and withdraw some old ones to protect the interests of policyholders as well as the industry.

 "That is why the law is being amended," he added.

AKM Monirul Hoque, vice-president of Bangladesh Insurance Association (BIA), said they received the draft and welcome the fact that many sections could undergo changes.

He informed that a meeting between the BIA executive and technical committees to be held within a week will thoroughly discuss the IDRA's proposal before submitting their own recommendations.

As per the draft, a new section will be added requiring insurers to appoint independent directors who would be free from the influence of the company management or shareholders.

The independent director will be responsible for ensuring the company's compliance with applicable laws, rules and regulators and also provide opinions for improving operations.

Another section states that without the IDRA's approval, insurers will not be able to avail loans or financial benefits from the company or any subsidiary controlled by its directors, shareholders, their families or other related individuals.

With approval of the IDRA, insurers will also have to appoint an appropriate number of actuaries in accordance with their company size.

The actuaries' qualifications, responsibilities, financial benefits and other conditions will be determined by the regulatory body.

As per the current law, insurers offering life insurance services only have to appoint actuaries if necessary and with IDRA approval.

Another proposed law states that only people with the prescribed qualifications of the IDRA should be appointed as the chief financial officer or company secretary of insurers following regulatory approval.

It also said no chief financial officer or company secretary approved by the insurer can be terminated without prior permission of the IDRA.

And before granting permission, the IDRA will provide a written order giving the individual an opportunity to disprove any allegation against him/her.

If proven guilty though, the person in question will not only face termination, but also be banned from working at any other insurance company for the next five years.

Moreover, any person who provides misleading, false or fraudulent statements, assurances or forecasts to lure customers into entering into insurance contracts shall be punished with fines of up to Tk 20 lakh.

They may also face imprisonment for a term of up to three years.

Another section of the draft states that any director, shareholder, chief executive officer, manager or other officer of an insurer will be fined between Tk 1 lakh to Tk 10 lakh depending on their different types of offences described in the existing law.

If the offence is repeated, the individual will be fined a maximum of Tk 10,000 for every day that elapsed since the first violation.