Kathmandu. The Insurance Development and Regulatory Authority (IDRA) has issued two separate letters seeking information on the paid-up capital of life and non-life insurance companies in the country. The chief executive officers and chief financial officers of insurance companies are struggling to respond to this regulatory body’s letter.
On September 6, two separate circulars were issued by IDRA’s Life and Non-Life branches. The letter, signed by Iftikharul Islam, Deputy Director, Life Branch, and Mohammad Soleiman, Deputy Director, Non-Life Branch, directed the companies to submit their paid-up capital details in the prescribed format along with bank, branch and account details.
The letter mentions three areas for displaying the paid-up amount: FDR, savings account and others. In the case of non-life insurance companies, the insurance sector regulator IDRA has directed all banks to submit proof to support the information.
According to Section 21 of the Insurance Act, 2010, at the time of registration or approval of the insurance company, the entrepreneurs have to deposit their respective shares (MDRT÷FDR) in the authorized bank. Section 23 of the Act requires a statutory security deposit of Rs. 15 million in Bangladesh Bank in the name of the insurance company through treasury bonds or approved securities. In this case, both these accounts should be in favour of the IDRA.
There is no legal provision for keeping savings or other current account capital idle under any circumstances at this stage of initial approval. However, IDRA has included columns in the letter chart to indicate which portion of the paid-up capital is classified as savings or ‘other’.
In addition, many insurance companies have increased the size of their paid-up capital over the past few years by issuing bonus shares to shareholders from their retained income. The issuance of bonus shares does not inject any new cash into the company; rather, it capitalizes the intrinsic value of the equity. It is impossible to determine which bank account or FDR holds the money. – Agency
