PART II
INVESTMENT, LOANS AND MANAGEMENT
Investment of assets27. (1) Every insurer shall invest and at all times keep invested in the manner provided in sub-section (2) assets equivalent to not less than the sum of –
(a) the amount of his liabilities to holders of life insurance policies in Bangladesh on account of matured claims; and
(b) the amount required to meet the liability on policies of life insurance maturing for payment in Bangladesh less-
(i) the amount of premiums which have fallen due to the insurer on such policies but have not been paid and the days of grace for payment of which have not expired, and
(ii) any amount due to the insurer for loans granted on and within the surrender values of policies of life insurance maturing for payment in Bangladesh issued by him or by an insurer whose business he has acquired and in respect of which he has assumed liability:
Provided that where an insurer has accepted reassurance in respect of any policies of life insurance issued by another insurer and maturing for payment in Bangladesh or has ceded reassurance to another insurer in respect of any such policies issued by himself, the said sum shall be increased by the amount of the liability involved in such acceptance and decreased by the amount of liability involved in such cession:
Provided further that the said sum shall not be decreased by the amount of any liability in respect of any reinsurances ceded to an insurer not registered in Bangladesh for life insurance business except to the extent of the amount of the liability incurred up to the 31st December, 1957.
(2) The investment required under sub-section (1) shall be made in the following manner, namely:-
43[(i) thirty per cent of the sum referred to in the said sub-section shall be invested in Government securities; and
(ii) the balance shall be invested in any other investment including capital market in such manner as may be prescribed.]
Explanation.- For the purpose of this sub-section the amount of any deposits made under section 7 or section 98 by the insurer in respect of his life insurance business shall be deemed to be invested or kept invested in Government securities.
44[(2A) If at any time the Government is of the opinion that any investment made by an insurer in pursuance of sub-section (2) is not suitable or desirable, it may, after giving the insurer an opportunity of being heard, direct him to realise the investment within such time as may be specified in the direction and to re-invest the amount so realised in accordance with the provisions of this section.]
(3) In computing the assets required by this section to be kept invested by an insurer, a sum equal to the amount of his liabilities to persons who are not citizens of Bangladesh in respect of life insurance policies issued in Bangladesh in favour of such persons but expressed in a currency other than the Bangladesh Taka may, if such sum is invested in securities of, and guaranteed as to principal and interest by, the Government of the country in whose currency such policies are expressed, be taken into account.
(4) The assets required by this section to be kept invested by an insurer shall be deposited by the insurer in Bangladesh for safe custody in the prescribed manner with a scheduled bank approved by the Government and the assets so deposited shall not be released or dealt with in any manner except in such circumstances and in such manner as may be prescribed:
Provided that the Government may, by notification in the official Gazette, exclude from the requirements of this sub-section any approved investments which cannot be deposited for safe custody with a scheduled bank on account of the nature of such investments.
Insurers of general insurance business to have assets invested in Bangladesh45[27A. (1) Every insurer transacting general insurance business in Bangladesh shall have assets invested in Bangladesh exceeding his liabilities by at least a sum of five lakhs of Taka or ten per cent of the net premium income, whichever is the higher:
Provided that an insurer defined in sub-clause (a) (ii) or sub-clause (b) of clause (9) of section 2 who has no paid-up capital or has a paid-up capital of less than five lakhs of Taka shall be deemed to have complied with the requirements of this sub-section if the assets invested by him in Bangladesh, not being less than ten per cent of the net premium income, exceed his liability,-
(a) up to the 31st day of December, 1970, by a sum of not less than two lakh and fifty thousand Taka;
(b) up to the 31st day of December, 1971, by a sum of not less than three lakh seventy-five thousand Taka; and
(c) up to the 31st day of December, 1972, by five lakh Taka.
(2) For the purpose of sub-section (1), the following shall be deemed to be the liability of the insurer, namely:-
(a) the net claims outstanding in respect of general insurance business in Bangladesh;
(b) forty per cent of the net premium in respect of Fire, Marine and Miscellaneous insurance business written in Bangladesh;
(c) one hundred per cent of the net premium in respect of Marine and Aviation Hull insurance business written in Bangladesh;
(d) amount of provision for dividends and unpaid dividends;
(e) amount due to Insurance Companies carrying on insurance business;
(f) amount provided for taxation;
(g) amount due to other creditors but excluding share capital, general reserves, investment reserve, reserve for bad and doubtful debts, depreciation funds except on such items as are taken credits for as “assets”.
Explanation.- Marine and Aviation Hull insurance business shall include any policies issued to an owner of a vessel or aircraft relating to any interest of such an owner in respect of a vessel or aircraft.
(3) For the purpose of computing assets referred to in sub-section (1), the following shall be excluded to the extent specified, namely:-
(a) in respect of premium outstanding as at 31st January, 1958, which still remains to be collected so much as still remains to be collected till the signing of the returns under section 15 by the auditors;
(b) in respect of the premium outstanding as at the end of 31st December, 1958, and subsequent years, so much as has not been collected by the 31st March next following;
(c) sundry debts outstanding as have not been recovered till the signing of the returns under section 15 by the auditors;
(d) furniture and fixtures, stationery, dead-stock;
(e) deferred and prepaid expenses to the extent determined by the Chief Controller of Insurance.
(4) Notwithstanding anything contained in sub-section (1), an insurer carrying on business at the commencement of the Insurance (Amendment) Ordinance, 1960, to whom that sub-section applies, shall be deemed to have complied with the requirements of this section if he has invested not less than one-fourth of the amount required to be invested before 31st December, 1960, not less than one-half before 31st December, 1961, and not less than three fourth before 31st December, 1962.
(5) Every insurer carrying on general insurance business in Bangladesh shall, along with the returns under section 15, submit to the Chief Controller of insurance a return certified by an auditor showing as at 31st day of December of the preceding year the assets invested in Bangladesh and all other particulars necessary to establish that the requirements of this section have been complied with and such return shall be certified by a principal officer of the insurer.
(6) The Chief Controller of Insurance may, at any time, take such steps as he may consider necessary for the inspection or verification of the assets invested in pursuance of sub-section (1) or for the purpose of securing the particulars necessary to establish that the requirements of that sub-section have been complied with and the insurer shall comply with any requisition made in this behalf by the Chief Controller of Insurance and if he fails to do so within two months from the receipt of the requisition he shall be deemed to have made default in complying with the requirements of this section.]
Restriction on certain investments, etc.
46[27B. Except with the prior approval of the Board of Directors at a regularly convened meeting by the vote of not less than two-thirds of the total number of directors and also upon a reference by the Board, of the Government, no insurer shall invest in, or hold any shares or debentures of, any company, firm or other business concern in which any of its directors, or any member of the family of such director, has any interest as proprietor, partner, director, manager or managing agent: Restriction on certain investments etc.
Provided that no investment shall be permissible in the first issue of capital by a company, firm or other business concern in which any of the directors of the insurer or any member of the family of such director has any interest as proprietor, partner, director, manager or managing agent.]
Statement of investments of assets
- (1) Every insurer registered under this Act carrying on the business of life insurance shall every year, within thirty-one days from the beginning of the year, submit to the Chief Statement of investments of assets
Controller of Insurance a return showing as at the 31st day of December of the preceding year the assets held invested in accordance with section 27, and all other particulars necessary to establish that the requirements of that section have been complied with, and such return shall be certified by a principal officer of the insurer.
(2) Every such insurer shall also furnish, within fifteen days from the last day of March, June and September, a return certified as aforesaid showing as at the end of each of the said months the assets held invested in accordance with section 27.
(3) The Chief Controller of Insurance may at his discretion require any insurer to whom sub-section (1) applies to submit before the 1st day of August in each or any year a return of the nature referred to in sub-section (1), certified as required by that sub-section and prepared as at the 30th day of June.
(4) In the case of an insurer having his principal place of business or domicile outside Bangladesh, the Chief Controller of Insurance may, on application made by the insurer, extend the periods of fifteen and thirty-one days mentioned in the foregoing sub-sections to thirty days and sixty days, respectively.
(5) The Chief Controller of Insurance shall be entitled at any time to take such steps as he may consider necessary for the inspection or verification of the assets invested in compliance with section 27 or for the purpose of securing the particulars necessary to establish that the requirements of that section have been complied with. The insurer shall comply with any requisition made in this behalf by the Chief Controller of Insurance, and if he fails to do so within two months from the receipt of the requisition he shall be deemed to have made default in complying with the requirements of this section.
Prohibition of loans29.(1) No insurer shall grant to, or to any member of the family of, any director, manager, actuary, auditor or officer of the insurer any loan or temporary advance, either on hypothecation or property or on personal security or otherwise, except a loan on life policies issued by the insurer within the surrender value.
(2) Except with the prior approval of the Board of Directors at a regularly convened meeting by the vote of not less than two-thirds of the total number of directors and also, upon a reference by the Board, of the Government, no insurer shall grant any loan or temporary advance to any firm or company in which any director, manager, actuary, auditor or officer of the insurer, or any member of the family of such director, manager, actuary, auditor or officer, has any interest as proprietor, partner, director, manager or managing agent.
(3) The director concerned shall not vote at, or otherwise participate in, the proceedings of the meeting of the Board considering the grant of any such loan or advance as is referred to in sub-section (2).
(4) Where any event occurs giving rise to circumstances the existence of which at the time of the grant of any subsisting loan or temporary advance would have made such grant a contravention of sub-section (1) or sub-section (2), such loan shall, notwithstanding any contract to the contrary, be repaid within three months from the occurrence of such event and, in case of default, the director, manager, actuary, auditor or officer concerned shall, without prejudice to any other penalty to which he may be liable, cease to hold office with the insurer granting the loan or advance on the expiry of the said three months.
(5) Nothing in sub-section (1) or sub-section (2) shall apply to loans or advances granted by an insurer to a banking company or to a subsidiary company being an insurer or to any insurer to which the insurer granting the loan or advance is a subsidiary company.
(6) Nothing in sub-section (1) shall apply to any stipend paid to any insurance agent or employer of agents while he is undergoing a course of training approved by the Government.
(7) The provisions of section 86D of the Companies Act, 1913 (VII of 1913), shall not apply to a loan granted to a director of an insurer being a company, if the loan is one granted on the security of a policy on which the insurer bears the risk and the policy was issued to the director on his own life, and the loan is within the surrender value of the policy.
(8) Subject to the provisions of sub-section (1) no insurer shall grant to any employee, insurance agent or employer of agents any loan or temporary advances except-
(a) loans on life policies issued by him to an employee, insurance agent or employer of agents within their surrender value;
(b) loans on mortgage of immovable property provided-
(i) the Chief Controller of Insurance certified that the insurer, if he transacts life insurance business, has complied with the provision of section 27;
(ii) the value of the property is at least twice the amount of the loan;
(iii) the property is situated in such towns as may be notified in this behalf;
(iv) the loan is made in such instalments 47[as may be decided by the Board of Directors of the insurer] if the purpose of the loan is to construct a house;
(v) the loan is repayable within a period of fifteen years; and
(vi) the loan is of such amount that the instalment of capital and interest does not exceed one-fourth of the basic salary of the employee or one-fourth of the renewal commission or over-riding commission of an agent or an employer of agents, as the case may be, during a year;
(c) loans for the purchase of a conveyance to an employee, insurance agent or employer of agents, provided-
(i) the employee, insurance agent or employer of agents has served the insurer continually for such period 48[as may be decided by the Board of Directors of the insurer];
(ii) the conveyance purchased is mortgaged to the insurer;
(iii) the loan does not exceed such amount, and is subject to such conditions as to the time allowed for its repayment, 49[as may be decided by the Board of Directors of the insurer] 50[:
Provided that the total loan referred to in sub-clause (b) (iv) and (c) shall not exceed ten per cent of the net profit of the preceding year of the insurer after payment of income tax;]
(d) temporary advances to an employee, insurance agent or employer of agents not exceeding,-
(i) in the case of an employee, two months’ salary;
(ii) in the case of an insurance agent, the renewal commission earned by him during two years immediately preceding the date of application for the advance, or a sum not exceeding two hundred and fifty Taka if he has not earned a renewal commission or has earned a renewal commission of less than two hundred and fifty Taka; and
(iii) in the case of an employer of agents, the renewal commission and the over-riding renewal commission earned by him during the year immediately preceding the date of application for the advance, or a sum not exceeding one thousand Taka if he has not earned any renewal commission and over-riding renewal commission or has earned a renewal commission and over-riding renewal commission of less than one thousand Taka:
Provided that, in respect of the life insurance business of an insurer, the total temporary advances referred to in this clause shall not exceed at any time ten thousand Taka, in the case of insurers having a life insurance
fund of less than ten lakhs of Taka and one per cent of the life insurance fund subject to a maximum of two hundred thousand Taka, in any other case.
Liability of directors, etc., for loss due to contraventions of sections 27 and 2930. If by reason of contravention of any of the provisions of section 27 or section 29, any loss is sustained by the insurer or by the policy-holders, every director, manager, officer or partner who is knowingly a party to such contravention shall, without prejudice to any other penalty to which he may be liable under this Act, be jointly and severally liable to make good the amount of such loss.
Assets of insurer how to be kept31. (1) None of the assets in Bangladesh of any insurer shall, except in the case of deposits made with the Bangladesh Bank under section 7 or section 98 or in so far as assets are required to be deposited for safe custody with a scheduled bank under sub-section (4) of section 27, be kept otherwise than in the name of a public officer approved by the Government, or in the corporate name of the undertaking, if a company, or in the name of the partners, if a firm, or in the name of the proprietor, if an individual.
(2) [Omitted by section 3 and the Second Schedule of the Bangladesh Laws (Revision And Declaration) Act, 1973 (Act No. VIII of 1973).]
Appointment of managing agent prohibited32. No insurer shall appoint a managing agent for the conduct of his business.
Power to restrict payment of excessive remuneration51[32A. (1) The Chief Controller of Insurance may, if he is satisfied that any insurer in the case of an insurer specified in sub-clause (a) (ii) or sub-clause (b) of clause (9) of section 2 in respect of all insurance business transacted by him and in the case of any other insurer in respect of the insurance business transacted by him in Bangladesh is paying any person remuneration, whether by way of commission or otherwise, on a scale disproportionate according to the normal standards prevailing in insurance business to the resources of the insurer, call upon the insurer to comply within six months with such directions as he may think fit to issue in the matter and if compliance with the direction so issued required the modification of any of the terms of the contract entered into by the insurer with such person no compensation shall be payable to such person by the insurer by reason only of such modification or of the resignation of such person if the modified terms are not acceptable to him and no payment by way of renewal commission or otherwise shall be made to such person by the insurer in respect of any payments made after the date of such resignation except at such rates as may be approved by the Chief Controller of Insurance in this behalf.
(2) Every insurer shall before the 30th day of June, 1958, and thereafter before the first day of March every year submit to the Chief Controller of Insurance a statement in the prescribed form showing the remuneration paid by way of commission or otherwise to any person in cases where such remuneration exceeds the sum of six thousand Taka in the previous calendar year.
(3) Where an insurer pays any person remuneration exceeding six thousand Taka a year in pursuance of any agreement between him and such person, the Chief Controller may, by notice in writing, require the insurer to submit a certified copy of such agreement and the insurer shall comply with any such requisition within the time specified in the notice.
Provisions relating to managers, etc.32B. (1) Notwithstanding anything to the contrary contained in the Companies Act, 1913, or in the Articles of Association of the insurer, if a company, or in any contract or agreement, no insurer shall, after the expiry of one year from the commencement of the Insurance (Amendment) Act, 1958, be directed or managed by, or employ as manager or officer or in any capacity, any person whose remuneration or any part thereof takes the form of commission or bonus on the total insurance business or on the total business of any class or sub-class of insurance business or on a part of any class or sub-class of general insurance business transacted by the insurer:
Provided that nothing in this sub-section shall be deemed to prohibit-
(i) the payment of commission to an insurance agent or employer of agents in respect of any insurance business procured by or through him;
(ii) the employment of any individual in a clerical or other subordinate capacity who, as an insurance agent, receives commission in respect of insurance business procured by him;
(iii) the employment as an officer of any individual who receives commission in respect of life insurance business procured by him in his capacity as an insurance agent or as an employer of agents;
(iv) the payment of a share in the profit of general insurance business;
(v) the payment of bonus in any year on a uniform basis to all salaried employees or any class of them by way of additional remuneration, such bonus, in the case of any employee, not exceeding in amount the equivalent of his salary for a period which, in the opinion of the Government, is reasonable having regard to the circumstances of the case.
(2) No person shall have any right, whether in contract or otherwise, to any compensation for any loss incurred by reason of the operation of any provision of this section.]