General Insurance

1. Q: Explain the principle of “utmost good faith” and its consequences in commercial
indemnity insurance.
A: Parties must disclose material facts; concealment = policy voidable, misuse of
indemnities, etc.
2. Q: Distinguish between “claim frequency” and “claim severity” and their role in pricing.
A: Frequency = number of claims; Severity = cost per claim; both drive loss ratio and
influence rate-making and risk segmentation.
3. Q: Describe the purpose and use of the “Burning Cost” method in determining
reinsurance pricing.
A: Retroactive analysis of loss experience; loss + expenses normalized; basis for ceding
commission and retention layers.
4. Q: What is “aggregate excess of loss” reinsurance, and when is it used?
A: A stop-loss layer covering total loss above retention; used when a portfolio may
generate multiple losses aggregating above threshold.
5. Q: How do “per occurrence” and “aggregate deductibles” differ in liability insurance?
A: Per-occ = deductible applied per claim/event; aggregate = total deductible applying
across all claims in policy period.
Life Insurance
6. Q: Explain the concept and calculation of “Net Single Premium.”
A: Present value of future benefits minus PV of future mortality; calculated via actuarial
present value (APV) method.
7. Q: What is “Universal Life Insurance” and how are its cash values determined?
A: A flexible-premium product with separate cash account, tied to credited interest rates
minus mortality/expense charges.
1. What is adverse selection, and how do insurers mitigate its impact?
Answer:
Adverse selection occurs when individuals with higher risks are more likely to purchase
insurance, while lower-risk individuals opt out. This skews the risk pool and leads to higher-
than-expected claims. Insurers mitigate adverse selection through underwriting, risk-based
pricing, waiting periods, pre-policy medical exams, and exclusions for pre-existing
conditions.

2. How do reinsurers help primary insurers manage catastrophic risk exposure?

Answer:
Reinsurers provide financial protection to primary insurers by absorbing a portion of their losses,
particularly from catastrophic events like earthquakes or hurricanes. Through excess-of-loss or
proportional reinsurance treaties, reinsurers limit the financial volatility of insurers and
improve solvency margins, enabling them to write more business.
3. Explain the concept of moral hazard and how insurance contracts attempt to reduce it.
Answer:
Moral hazard arises when an insured party has less incentive to prevent loss because they are
protected by insurance. To reduce it, insurers use deductibles, co-insurance, claims
investigations, and policy limits. These mechanisms ensure that insureds share in the risk and
remain incentivized to act prudently.

4. What role do actuarial assumptions play in pricing long-term insurance products?

Answer:
Actuarial assumptions such as mortality, morbidity, lapse rates, interest rates, and expense
assumptions are critical in projecting future claims and cash flows. They are used in net
premium valuation and profit testing to determine appropriate pricing, reserve setting, and
capital requirements for long-duration insurance contracts like life and annuities.

5. Describe how Solvency II impacts European insurance firms.

Answer:
Solvency II is a regulatory framework that requires EU insurers to maintain adequate capital to
reduce the risk of insolvency. It emphasizes a risk-based approach, covering three pillars:
1. Quantitative Requirements (Solvency Capital Requirement, Minimum Capital
Requirement),
2. Governance and Risk Management, and
3. Disclosure and Reporting.
It aims to improve policyholder protection and promote market discipline.

6. What are the key differences between facultative and treaty reinsurance?
Answer:
 Facultative Reinsurance: Covers individual, specifically negotiated risks. Suitable for
large or unusual exposures.
 Treaty Reinsurance: Automatically covers a portfolio or class of business based on
predefined terms. Efficient for ongoing and homogeneous risks.
Treaty reinsurance offers simplicity and scalability, while facultative provides
customization.

7. How does stochastic modeling improve reserve adequacy assessments?

Answer:
Stochastic modeling uses simulations (e.g., Monte Carlo) to project a wide range of potential
outcomes, allowing actuaries to assess reserve adequacy under uncertainty. It helps estimate the
tail risk, understand distribution of liabilities, and set reserves that are more responsive to
volatility and stress scenarios, especially for variable annuities or long-term health insurance.
8. What is the principle of indemnity and how does it affect claims settlement?
Answer:
The principle of indemnity ensures that the insured is restored to their financial position before
the loss but not better off. This prevents profit from insurance. It affects claim settlements by
limiting payouts to the actual value of the loss and can involve actual cash value, replacement
cost, or market value assessments.

9. In cyber insurance, what are the challenges in underwriting and pricing?

Answer:
Challenges include:
 Rapidly evolving risk landscape (new threats, technologies),
 Lack of historical data,
 Accumulation risk (e.g., single cyberattack affecting multiple insureds), and
 High correlation of risks.
Underwriters rely on firm-level cybersecurity assessments, scenario analysis, and expert
judgment, often blending actuarial and non-traditional approaches.

10. What is embedded value (EV) in life insurance, and how is it calculated?
Answer:
Embedded Value is a measure of the present value of future profits from in-force business, plus
the adjusted net asset value of a life insurance company.
EV = Net Asset Value + Value of In-force (VIF)
It provides a more realistic view of insurer profitability than traditional accounting metrics and is
used in M&A, performance management, and investor reporting.

Would you like these categorized by sector (e.g., life, P&C, health) or formatted into a study
guide or quiz format?
You said:
What is adverse selection, and how do insurers mitigate its impact? বাংলায় উত্তর দিন

ChatGPT said:
প্রশ্ন: Adverse selection কী, এবং বীমা কোম্পানিগুলো কীভাবে এর প্রভাব কমায়?
উত্তর (বাংলায়):
Adverse selection হলো এমন একটি পরিস্থিতি যেখানে উচ্চ ঝুঁকিপূর্ণ (high-risk)
ব্যক্তি বা প্রতিষ্ঠানগুলো বীমা গ্রহণে বেশি আগ্রহী হয়, আর কম ঝুঁকিপূর্ণ
(low-risk) গ্রাহকরা বীমা থেকে বিরত থাকে। এর ফলে বীমা কোম্পানির ঝুঁকি বেড়ে
যায় এবং ক্ষতির সম্ভাবনাও বাড়ে, কারণ অধিক ঝুঁকিপূর্ণ গ্রাহকদের দাবি
(claim) বেশি হয়।
বীমা কোম্পানিগুলো যেভাবে adverse selection কমায়:
1. Underwriting (বীমা মূল্যায়ন): বীমা গ্রহণের আগে গ্রাহকের স্বাস্থ্য,
বয়স, পেশা, জীবনযাত্রা ইত্যাদি যাচাই করে ঝুঁকি মূল্যায়ন করা হয়।
2. Risk-based Pricing (ঝুঁকিভিত্তিক প্রিমিয়াম নির্ধারণ): ঝুঁকির পরিমাণ
অনুযায়ী প্রিমিয়াম নির্ধারণ করা হয় — বেশি ঝুঁকি থাকলে বেশি
প্রিমিয়াম।
3. Waiting Period (প্রতীক্ষা সময়): অনেক ক্ষেত্রে পলিসি কার্যকর হওয়ার
পর একটি নির্দিষ্ট সময় পর্যন্ত দাবি করা যায় না, বিশেষত স্বাস্থ্য
বীমায়।
4. Exclusions (বর্জন): কিছু পূর্ব-বিদ্যমান রোগ বা অবস্থা পলিসির আওতায়
আনা হয় না।
5. Medical Examination (চিকিৎসা পরীক্ষা): স্বাস্থ্য বীমার ক্ষেত্রে বীমা
গ্রহণের আগে শারীরিক পরীক্ষা করানো হয়।
এইসব পদ্ধতির মাধ্যমে বীমা কোম্পানিগুলো নিশ্চিত করে যে, ঝুঁকির ভারসাম্য
বজায় থাকে এবং শুধুমাত্র উচ্চ ঝুঁকির গ্রাহকরা বীমা না করে, কম ঝুঁকির
গ্রাহকরাও বীমার অন্তর্ভুক্ত হন।
প্রয়োজনে আমি উদাহরণসহ ব্যাখ্যা করতে পারি — আপনি চাইলে জানাতে পারেন।
1. What is the difference between Net Premium Reserve and Gross Premium Reserve in life
insurance?
Answer:
 Net Premium Reserve (NPR) is calculated using only the net premium (excluding
expenses) and reflects the present value of future benefits minus the present value of
future net premiums.
 Gross Premium Reserve (GPR), also called the actuarial reserve, includes loading for
expenses and is based on the actual premium charged to policyholders. It is more realistic
and used for solvency and regulatory purposes under most modern frameworks like
Solvency II or RBC.
2. How does the principle of "level premium" affect the reserve accumulation in a whole
life policy?
Answer:
Level premiums mean that the premium remains constant throughout the policyholder's life.
Since the risk of death increases with age, in the early years, premiums exceed the cost of
insurance, creating a surplus (reserve), which accumulates and helps cover the higher cost in
later years. This results in the buildup of actuarial reserves.
3. What is the role of mortality tables in life insurance pricing?
Answer:
Mortality tables provide statistical data on the probability of death at each age. Insurers use them
to estimate the expected cost of future death claims. Modern tables like the Select and Ultimate
tables incorporate underwriting effects in early years and help actuaries determine premiums,
reserves, and pricing strategies.
4. What is lapse-supported pricing in Universal Life or Variable Universal Life products?
Answer:
Lapse-supported pricing assumes that a significant portion of policyholders will surrender their
policies before maturity. The insurer benefits from retaining the premiums without paying out
full benefits, allowing for lower initial premiums. It’s a risky approach and is sensitive to actual
lapse experience.
5. How do Guaranteed Minimum Benefits (GMxB) impact the risk profile of Variable Life
products?
Answer:
GMxBs, such as Guaranteed Minimum Death Benefit (GMDB) or Guaranteed Minimum
Accumulation Benefit (GMAB), provide downside protection. They increase the insurer's
liability, especially during market downturns, and require hedging strategies, capital reserves,
and sophisticated modeling (e.g., stochastic simulations) to manage risks.
6. Explain the use of stochastic modeling in life insurance reserving.
Answer:
Stochastic modeling uses simulations (e.g., Monte Carlo) to project future cash flows under
various economic and demographic scenarios. It allows for a probabilistic assessment of reserves
and capital needs, especially for products with embedded options or market sensitivity, such as
variable annuities and participating life insurance.
7. What is the concept of Embedded Value (EV) and how is it used in life insurance?
Answer:
Embedded Value is the present value of future profits from in-force business plus the adjusted
net asset value. It is used by life insurers to measure the economic value of the company and is a
key metric for shareholders, analysts, and in mergers and acquisitions.
8. How does reinsurance support capital management in life insurance?
Answer:
Life insurers use reinsurance (e.g., coinsurance, YRT - yearly renewable term) to transfer part of
their risk to reinsurers. This reduces their required capital, improves solvency ratios, enables
capacity for new business, and can help manage earnings volatility and regulatory compliance.
9. What are the key regulatory solvency frameworks applicable to life insurers?
Answer:
Key frameworks include:
 Solvency II (Europe): Risk-based capital with a market-consistent valuation.
 RBC (Risk-Based Capital) in the U.S.: Factors assigned to various risks (C1–C4).
 IFRS 17: New international accounting standard focusing on current estimates and
consistent profit emergence.
These frameworks influence product design, reserving, and financial reporting.
10. What is the significance of the Policyholder Behavior assumption in product modeling?
Answer:
Policyholder behavior, such as lapses, partial withdrawals, and loans, significantly affects cash
flow and profitability. These assumptions are critical in pricing and reserving, particularly for
interest-sensitive and investment-linked products. Insurers use dynamic lapse models that react
to changes in interest rates or policy value to better capture real-world behavior.
1. Q: What are the minimum paid-up capital requirements for life insurers in Bangladesh
under the Insurance Act 2010?
A: The Insurance Act 2010 increased the minimum paid-up capital for life insurers from
Tk 75 million to Tk 300 million .
2. Q: What is the legal requirement regarding actuaries for life insurance companies in
Bangladesh?
A: IDRA mandated that all life insurers must establish an actuarial department and appoint
actuaries (at least 2 staff, 3 if life fund > Tk 5 billion) to evaluate financial risks and product
pricing .

3. Q: What solvency margins are prescribed for life insurers, and who monitors them?
A: Under the Insurance Act 2010, life insurers must maintain mandatory solvency margins
(assets vs liabilities) based on formulas defined by IDRA. The regulator closely supervises
these .

4. Q: Describe the actuary certificate requirement for new life insurance products.
A: Section 16 requires life insurers to submit a certificate from the appointed actuary—along
with full terms and premiums—to IDRA 30 days before launching a new policy, or face up to
Tk 500,000 fine .

5. Q: How does double insurance apply to life policies in Bangladesh?

A: Under law, double insurance is fully permissible for life policies—there is no maximum limit;
beneficiaries can claim under all life policies independently .

6. Q: What is “mobile life insurance” and how is it regulated?

A: Telecom operators offer life insurance to subscribers spending over Tk 250/month. These
policies operate under IDRA's Mobile Insurance guidelines, reflecting innovation in
micro-insurance .

7. Q: Explain the management expense limits for life insurers.

A: According to Section 62, life insurers must not exceed prescribed annual limits on
commissions and management expenses (based on premium income and insurer size);
declarations by CEO, directors, and auditors are required .

8. Q: What are the key objectives of the Insurance Development and Regulatory Authority
(IDRA)?
A: Established in 2010, IDRA regulates 81 insurers (35 life) to ensure consumer protection,
financial stability, harmonization with international standards, risk-based supervision, and
solvency requirements .
9. Q: How are state-owned life schemes administered under Jiban Bima Corporation (JBC)?
A: Created in 1973, JBC offers 15 schemes (whole-life, endowment, pension, group, mortgage,
etc.), operates 7 regionals & 343 branches, and enforces national policy post-1971 .

10. Q: What are the common financial-soundness issues among private life insurers in
Bangladesh?
A: Empirical studies show many life insurers have high expense ratios (> IDRA’s 20% limit),
weak underwriting margins, low reinsurance coverage, excessive liquid assets but overall
financial instability (poor Z-scores) .

💡 Why these matter

These questions cover critical areas for job exams:
 Regulatory compliance: capital, expenses, solvency, product approval
 Actuarial science: deployment of actuaries & risk modeling
 Innovation & market trends: mobile insurance, micro-insurance
 Public sector structure: JBC schemes vs. private sector dynamics
 Industry health: diagnosing financial weaknesses for policy improvement

1. Q: What are the capital requirements for establishing a life insurance company in
Bangladesh under the Insurance Act, 2010?
A:
As per the Insurance Act, 2010, the minimum paid-up capital for a life insurance company in
Bangladesh is BDT 300 million (30 crore). This is an increase from the earlier requirement of
BDT 75 million, reflecting the need for stronger capital bases in the sector. The capital must be
in the form of equity shares, and promoters must provide detailed declarations of sources of
capital to the Insurance Development and Regulatory Authority (IDRA) during registration.

2. Q: What is the role of the actuary in a life insurance company in Bangladesh?

A:
An actuary plays a pivotal role in risk assessment, premium calculation, reserve estimation,
and product pricing. As per IDRA regulations, every life insurance company must have a
qualified actuary or access to actuarial services. Actuarial certificates are mandatory when
launching new products, conducting valuation of liabilities, or computing solvency margins.
Companies with a life fund exceeding BDT 500 crore are required to maintain an internal
actuarial department with at least three members.

3. Q: What is the process for launching a new life insurance product under Bangladeshi law?
A:
According to Section 16 of the Insurance Act, 2010, before launching any new product, a life
insurance company must:
 Submit a detailed copy of the proposed insurance policy to IDRA.
  Attach an actuarial certificate confirming the policy's viability and solvency.
 Include premium charts, benefit structures, and assumptions used.
 Submit at least 30 days prior to the intended launch date.
Failure to comply can result in fines up to BDT 5 lakh and possible product suspension.

4. Q: What is the significance of Section 62 of the Insurance Act, 2010 concerning life
insurers’ expenses?
A:
Section 62 regulates the maximum allowable expenses for commissions and management costs
incurred by life insurance companies. It ensures financial discipline by:
 Capping acquisition and renewal expenses as a percentage of total premium.
 Mandating submission of a declaration signed by the CEO, two directors, and an
auditor.
 Allowing IDRA to penalize companies exceeding limits without valid justification.
This provision helps maintain fair pricing and protects policyholders' funds.

5. Q: What is Mobile Insurance in Bangladesh and how does it function?

A:
Mobile insurance is a micro-insurance initiative introduced by telecom operators in partnership
with insurers. It targets low-income customers. Features include:
 Automatic life coverage for users who recharge BDT 250+ monthly.
 Premium is borne by the telecom operator or deducted nominally.
 Coverage usually ranges from BDT 10,000–30,000.
 Operates under specific IDRA guidelines to prevent mis-selling and fraud.
It's considered a successful example of digital financial inclusion.

6. Q: How does the solvency margin requirement protect policyholders in life insurance?
A:
The solvency margin is the excess of assets over liabilities that an insurer must maintain to
ensure financial health. IDRA requires all life insurers to:
 Maintain solvency according to a prescribed formula, factoring in actuarial liabilities and
risks.
 Submit annual solvency statements audited by a chartered accountant and signed by an
actuary.
 Failure to maintain the margin may result in warnings, capital calls, or even suspension of
licenses.
This system provides a safety buffer for policyholders in case of market downturns or mass
claims.
7. Q: How does Jiban Bima Corporation (JBC) operate and differ from private life insurers?
A:
JBC is the only state-owned life insurance company, established under the Bangladesh
Insurance (Nationalisation) Order, 1972. It has several unique features:
 Offers 15 types of life insurance schemes, including group, micro-insurance, and
mortgage protection.
 Operates under a public mandate, not purely for profit.
 Provides insurance in remote areas where private insurers lack reach.
 Revenue contributes to the government exchequer, and it's regulated by both IDRA and
the Ministry of Finance.

8. Q: What is Double Insurance in the context of life insurance in Bangladesh?

A:
Double Insurance refers to the same person taking multiple life policies from different insurers.
Under Bangladeshi law:
 There is no legal restriction on taking multiple life insurance policies.
 All policies can be claimed independently upon death or maturity.
 The principle of indemnity does not apply in life insurance as life has no measurable
monetary value.
However, insurers often assess total exposure during underwriting to manage risk.

9. Q: What challenges do private life insurers face in Bangladesh, according to IDRA reports?
A:
Several structural and operational challenges affect private life insurers, such as:
 Overhead expenses exceeding IDRA's 20% cap.
 Poor investment strategies leading to low returns.
 Inadequate reinsurance coverage and poor actuarial standards.
 Delays in claim settlements and weak customer service.
 Financial health indicators like low Z-scores, signaling potential instability.
These issues can undermine public trust and necessitate regulatory intervention.

10. Q: How does IDRA ensure corporate governance and transparency in life insurance
companies?
A:
The Insurance Development and Regulatory Authority (IDRA) enforces several governance
standards:
 Mandatory external audits and actuarial valuations.
 Limitations on family ownership and related-party transactions.
 Code of Conduct for Board Members.
 Required publication of annual reports and solvency statements.
 Penalties for non-compliance, ranging from warnings to license cancellation.
✅ Summary of Key Areas Covered:
Topic Coverage Highlights

Insurance Act 2010 Sections 16, 62, and solvency rules

IDRA Regulations Governance, expenses, solvency, capital requirements

Jiban Bima Corporation State-owned schemes and outreach

Product Launch Requirements Actuarial certification, documentation

Mobile Insurance Innovation in micro-life insurance

1. Q: What is the Principle of Utmost Good Faith and how is it applied in Bangladeshi
insurance law?
A:
The Principle of Utmost Good Faith (Uberrimae Fidei) requires both parties (insurer and
insured) to fully disclose all material facts before entering into an insurance contract. In
Bangladesh:
 It is codified under the Insurance Act, 2010.
 The insured must disclose all known risks (e.g., health status for life insurance).
 Non-disclosure or misrepresentation can lead to repudiation of the claim or
cancellation of the policy.
 For example, if a policyholder conceals a terminal illness at the time of proposal, the
insurer can legally reject a future claim.

2. Q: Explain the Principle of Insurable Interest and its legal significance in Bangladesh.
A:
Insurable Interest means that the insured must have a financial or pecuniary interest in the
subject matter of insurance.
In Bangladesh:
 For life insurance, insurable interest must exist at the inception of the policy (e.g.,
spouses, children, business partners).
 For property and general insurance, insurable interest must exist at the time of loss.
 This principle prevents moral hazard and ensures that insurance is not used for wagering.
Violation can render the policy void ab initio (from the beginning).

3. Q: Describe the Principle of Indemnity. How does it differ in Life and General Insurance in
Bangladesh?
A:
The Principle of Indemnity means the insured should be restored to their original financial
position—no more, no less.
  In general insurance (fire, marine, motor), indemnity is applied by paying for the actual
loss or replacing/repairing the item.
 In life insurance, indemnity does not apply, as the value of human life cannot be
measured, and a pre-agreed sum is paid upon death or maturity.
 This principle is foundational to general insurance but excluded in life insurance.

4. Q: What is the Principle of Contribution and when is it enforced in Bangladesh?

A:
The Principle of Contribution applies when the insured has multiple policies covering the
same risk.
In Bangladesh:
 This is relevant mainly for property or fire insurance.
 If a loss occurs, the insured cannot recover more than the actual loss, and insurers must
contribute proportionally.
 Formula:
Claim Payable=(Sum Insured by a CompanyTotal Sum Insured from All Insurers)×Loss\text{Claim
Payable} = \left(\frac{\text{Sum Insured by a Company}}{\text{Total Sum Insured from All
Insurers}}\right) \times \
text{Loss}Claim Payable=(Total Sum Insured from All InsurersSum Insured by a Company)×Loss
Example: If a factory is insured with two companies for BDT 5 lakh and BDT 10 lakh
respectively, and a loss of BDT 3 lakh occurs, the companies share the liability in the 1:2 ratio.

5. Q: What is the Principle of Subrogation and how does it benefit insurers in Bangladesh?
A:
Subrogation allows an insurer, after paying a claim, to step into the legal rights of the insured
to recover the amount from a third party responsible for the loss.
 Common in motor, marine, and fire insurance.
 Prevents the insured from recovering more than the loss.
 In Bangladesh, it is recognized by the Insurance Act and enforced by courts.
Example: If your insured car is damaged by a third party, and the insurer pays your claim, the
insurer can then sue the third party to recover that amount.

6. Q: What is the Principle of Proximate Cause and how is it interpreted in claims settlement
in Bangladesh?
A:
Proximate Cause means the dominant and effective cause of a loss—not necessarily the
nearest in time.
In Bangladesh:
 The insurer is liable only if the proximate cause is a covered peril.
 Courts in Bangladesh often refer to common law doctrines and local judicial precedents
in disputes.
Example: In marine insurance, if goods are lost due to fire caused by negligence, and fire is
covered but negligence isn’t, the claim is payable because the proximate cause (fire) is covered.

7. Q: Can insurance contracts be considered wagering agreements under Bangladeshi

contract law? Why or why not?
A:
No. Insurance contracts are not wagering agreements because they fulfill the following
conditions:
 Presence of insurable interest.
 Risk transfer, not betting.
 Regulated by the Insurance Act, 2010, and not by the Contract Act, 1872 gambling
provisions.
Unlike wagers, insurance is based on risk management, not speculation. Therefore, they are
legally valid and enforceable.

8. Q: How does the Principle of Risk Management apply to insurance underwriting in

Bangladesh?
A:
Risk management involves assessing, pricing, and mitigating risks during underwriting.
 Underwriters in Bangladesh use mortality tables, medical tests, and risk profiling to
accept or reject applications.
 Companies use reinsurance to transfer part of their exposure to global reinsurers.
 IDRA mandates that all insurers establish an internal risk management committee to
monitor solvency and exposure limits.
This principle ensures financial sustainability and protects policyholders.

9. Q: What legal protections are available to policyholders under the Insurance Act, 2010 in
Bangladesh?
A:
The Insurance Act provides several protections:
 Mandatory disclosure of terms and conditions.
 Right to cancel policy within 15 days ("free look period").
 IDRA can penalize insurers for unfair trade practices, non-settlement of claims, or
mis-selling.
 Policyholders may lodge complaints with IDRA’s grievance redress cell or approach
the Insurance Tribunal.
These protections are in place to maintain consumer trust and market stability.
10. Q: How does the principle of pooling of risk operate in life insurance in Bangladesh?
A:
The Pooling of Risk principle is the foundation of insurance, where many pay premiums so
that few can be compensated for losses.
In Bangladesh:
 Life insurers collect premiums from many policyholders and create a life fund.
 This fund is invested and used to pay death/maturity claims, bonuses, and expenses.
 Actuarial valuation ensures that the fund remains solvent and sustainable.

1. Q: What are the minimum capital requirements for general insurance companies in
Bangladesh under the Insurance Act 2010?
A:
As per the Insurance Act, 2010, the minimum paid-up capital requirement for general (non-
life) insurance companies in Bangladesh is BDT 400 million (Tk 40 crore). This increase from
the previous BDT 150 million is aimed at:
 Enhancing financial stability
 Ensuring claim-paying ability
 Aligning with international best practices (IAIS)
IDRA verifies capital adequacy during both registration and annual reporting.

2. Q: What is the structure and role of the Sadharan Bima Corporation (SBC) in general
insurance?
A:
Sadharan Bima Corporation (SBC) is the only state-owned general insurance company in
Bangladesh, established in 1973 through the nationalization of the insurance industry.
Key roles:
 Operates as both a direct insurer and national reinsurer
 Offers fire, marine, motor, engineering, and miscellaneous insurance
 Has a legal monopoly on reinsurance business, where all general insurers must cede
50% of their reinsurable business
 Plays a regulatory and stabilizing role in the general insurance market

3. Q: What is the claim settlement process in general insurance as per Bangladeshi

regulations?
A:
The general insurance claim process involves:
1. Notice of loss by the insured
2. Appointment of an independent surveyor
3. Submission of survey report to the insurer
4. Verification and approval of claim
5. Final settlement and payment
As per IDRA’s guidelines:
  All claims must be settled within 90 days of claim submission.
 Any delay must be explained in writing.
 IDRA can impose penalties for delayed or unjustified rejections.

4. Q: What is the significance of tariff advisory regulations for fire and marine insurance in
Bangladesh?
A:
Tariff Advisory Committee (TAC) regulations provide standardized premium rates and policy
conditions for:
 Fire Insurance
 Marine Cargo Insurance
 Motor Insurance
These tariffs are mandatory to:
 Prevent undercutting and price wars
 Ensure financial health of insurers
 Provide transparency and fairness
IDRA enforces compliance through audits and penalties for deviation from the tariff structure.

5. Q: How does reinsurance work in general insurance companies in Bangladesh?

A:
Reinsurance allows insurers to transfer part of their risk to another insurer (reinsurer), thus
protecting their balance sheet.
In Bangladesh:
 All general insurers are required to cede 50% of their reinsurable business to SBC
(obligatory quota share).
 The remaining 50% can be retained or placed with foreign reinsurers.
 Reinsurance treaties must be approved annually by IDRA.
 This helps ensure solvency and reduces the impact of catastrophic losses.

6. Q: What is Engineering Insurance, and how is it applied in Bangladesh?

A:
Engineering Insurance covers construction and industrial risks. Common types in Bangladesh
include:
 Contractor’s All Risks (CAR)
 Erection All Risks (EAR)
 Machinery Breakdown (MB)
 Boiler and Pressure Plant (BPP)
These are vital for infrastructure projects (e.g., Padma Bridge, metro rail) and protect against
risks like:
 Construction errors
 Equipment failure
  Third-party liability
These policies are often mandatory for government or donor-funded projects.

7. Q: What is the legal remedy for policyholders in case of dispute in general insurance
claims in Bangladesh?
A:
If a general insurance claim is denied unfairly or delayed:
 The policyholder can file a complaint to IDRA under Section 67 of the Insurance Act,
2010.
 If not resolved, the policyholder may appeal to the Insurance Tribunal established
under Section 124 of the same Act.
 Civil courts may also be approached under the Contract Act 1872, depending on the
nature of the dispute.
This multi-tiered structure ensures transparency and accountability.

8. Q: What are common types of general insurance fraud in Bangladesh and how are they
mitigated?
A:
Common fraud types:
 Inflated claims (e.g., overstated fire or motor damage)
 False documentation (fake invoices, repair bills)
 Moral hazard (intentional loss)
Mitigation strategies:
 Use of licensed surveyors and loss assessors
 Cross-verification of documents
 Digital claim processing with audit trails
 IDRA conducts special inspections and can penalize fraudulent practices

9. Q: How is marine insurance practiced in Bangladesh, and what are its key coverages?
A:
Marine Insurance covers cargo, ships (hull), and related liabilities.
Key types in Bangladesh:
 Marine Cargo Insurance – for imports and exports (CIF/FOB terms)
 Marine Hull Insurance – for ships, launches, trawlers
 Inland Transit – for domestic transportation
Cargo policies may include:
 Basic cover (Fire, Explosion, Collision)
 ICC (A), (B), or (C) clauses (Institute Cargo Clauses)
 War and strike extensions
Marine policies must comply with TAC tariffs, and premium rates depend on commodity type,
voyage, and packaging.
10. Q: What are IDRA's regulatory priorities for general insurers in Bangladesh?
A:
The Insurance Development and Regulatory Authority (IDRA) focuses on:
 Enforcing solvency margins and capital adequacy
 Preventing under-pricing and dumping through tariff monitoring
 Ensuring timely claim settlement
 Promoting digital transformation and insurance inclusion
 Encouraging insurers to expand outside urban centers
IDRA also publishes annual performance reports and can cancel licenses for consistent non-
compliance.

✅ Summary of Topics Covered:

Topic Key Insights

Capital Requirements BDT 400 million minimum for general insurers

Sadharan Bima Corporation State insurer + national reinsurer

Reinsurance 50% obligatory cession to SBC

Tariff Compliance Mandatory tariffs for fire, marine, and motor insurance

Legal Remedies IDRA complaint > Tribunal > Civil Courts

Engineering Insurance Covers construction risks (CAR, EAR, etc.)

Marine Insurance ICC clauses, transit coverage for imports/exports

IDRA Regulations Solvency, fair pricing, claim settlement enforcement

1. Q: What is IDRA and when was it established?

A:
The Insurance Development and Regulatory Authority (IDRA) is the statutory body
responsible for regulating and supervising the insurance industry in Bangladesh.
 Established under: The Insurance Act, 2010
 Operational since: January 26, 2011
 Objective: To ensure fair, transparent, and orderly growth of both life and general
insurance sectors.
It replaced the former Controller of Insurance under the Ministry of Commerce.
2. Q: What are the core functions of IDRA as per the Insurance Act, 2010?
A:
IDRA's primary functions under Section 12 of the Insurance Act, 2010 include:
 Regulating and supervising life and general insurance companies.
 Approving insurance products, tariffs, and premium rates.
 Ensuring the solvency and financial soundness of insurers.
 Granting, suspending, or canceling licenses of insurers, brokers, agents.
 Protecting the interests of policyholders.
 Conducting market inspections, audits, and investigations.
IDRA also publishes directives and circulars to enforce compliance.

3. Q: How does IDRA protect policyholders' interests in Bangladesh?

A:
IDRA ensures policyholder protection through:
 Requiring insurers to offer clear and transparent policy documentation.
 Mandating a 15-day free-look period for policy review and cancellation.
 Enforcing timely claim settlement—typically within 90 days of claim filing.
 Providing a grievance redress mechanism under Section 67 of the Insurance Act.
 Penalizing insurers for unethical practices such as mis-selling or unjust claim denial.
It also encourages public awareness through insurance literacy programs.

4. Q: What regulatory powers does IDRA hold over insurance companies?

A:
IDRA holds extensive regulatory, licensing, and punitive powers, including:
 Licensing of insurance companies, brokers, agents, and surveyors.
 Imposing penalties, suspensions, or cancellations of licenses.
 Approving reinsurance arrangements (domestic and international).
 Setting investment guidelines and capital adequacy norms.
 Enforcing corporate governance standards under Solvency Margin and Risk-Based
Capital norms.
Violation of IDRA directives can result in fines up to BDT 10 million or more.

5. Q: What is IDRA’s role in approving insurance products and premiums?

A:
IDRA plays a critical role in:
 Approving new insurance products before launch.
 Reviewing tariff structures (especially for fire, marine, and motor insurance).
 Ensuring actuarial valuation for life insurance products.
 Rejecting any product deemed unfair, deceptive, or actuarially unsound.
IDRA uses a product review committee and often requires justification of premiums based on
risk assessment and data.
6. Q: How does IDRA enforce solvency and capital adequacy standards?
A:
IDRA mandates the following to ensure financial strength:
 Minimum Paid-up Capital: BDT 400 million for general and BDT 300 million for life
insurers.
 Solvency Margin: Maintains the ability to pay claims; calculated using liabilities vs.
available assets.
 Risk-Based Capital (RBC) model: Being gradually introduced.
 Annual actuarial valuation reports for life insurance.
 Mandatory submission of quarterly and annual financial statements.
Non-compliance can lead to restriction of business or license suspension.

7. Q: What role does IDRA play in reinsurance in Bangladesh?

A:
IDRA controls and supervises reinsurance operations through:
 Requiring all insurers to cede 50% of general insurance risks to Sadharan Bima
Corporation (SBC) (compulsory quota share).
 Approving reinsurance treaties annually (both local and international).
 Ensuring that overseas reinsurance is placed with rated reinsurers (usually A- or
higher).
 Verifying that retention limits are aligned with the insurer’s capital base.
This mechanism promotes domestic retention while managing catastrophic risks.

8. Q: What enforcement actions can IDRA take against non-compliant insurers?

A:
IDRA can take both administrative and legal actions, including:
 Imposing fines and penalties under Section 120 of the Insurance Act.
 Issuing show-cause notices and conducting hearings.
 Appointing special auditors or inspectors.
 Suspending agents/brokers/companies for misconduct or fraud.
 Filing cases in the Insurance Tribunal for severe violations.
Such enforcement ensures market discipline and consumer trust.

9. Q: How is IDRA structured and governed administratively?

A:
IDRA is governed by:
 A Chairman, appointed by the government
 Four Members, each in charge of a functional area (Actuarial, Legal, Admin, and
Finance)
  A full-time CEO-equivalent Secretary
 Several operational departments: Licensing, Supervision, Actuarial, Enforcement,
Legal, Audit
The authority reports to the Ministry of Finance and works closely with Bangladesh Bank and
BSEC on financial regulations.

10. Q: What are the recent strategic priorities of IDRA to develop the insurance sector in
Bangladesh?
A:
Recent strategic goals include:
 Implementing digital insurance systems (e.g., online policy issuance and claims).
 Promoting microinsurance and inclusive insurance to expand rural coverage.


1. Q: What is Miscellaneous Insurance and how is it classified in Bangladesh?

A:
Miscellaneous Insurance refers to all general (non-life) insurance policies that are not classified
under fire, marine, or motor categories. In Bangladesh, it includes:
 Personal Accident Insurance
 Engineering Insurance (e.g., CAR, EAR, Machinery Breakdown)
 Liability Insurance
 Burglary and Theft Insurance
 Cash-in-Transit or Fidelity Guarantee
 Travel Insurance
 Workmen’s Compensation Insurance
These are vital for both personal and commercial risk coverage and are regulated by IDRA under
the Insurance Act, 2010.

2. Q: What is Personal Accident (PA) Insurance and how does it function in Bangladesh?
A:
Personal Accident Insurance provides financial compensation in case of accidental death or
disability.
In Bangladesh, typical PA policies cover:
 Accidental death: 100% sum insured
 Permanent total disability: 100%
 Partial disability: As per a predefined schedule
 Temporary disability: Weekly benefits
It’s commonly purchased by individuals, employees, and passengers (especially in transport
companies).
Claims require:
 Police report (if applicable)
 Medical reports
  Proof of loss or disability

3. Q: What is the scope and importance of Workmen's Compensation Insurance in

Bangladesh?
A:
Workmen’s Compensation Insurance (WCI) is mandatory under the Workmen’s
Compensation Act, 1923, and it covers:
 Injury or death of workers arising out of and in the course of employment.
 Medical expenses, disability payments, and death benefits.
Employers in Bangladesh are legally required to carry this insurance for their workers,
especially in sectors like:
 Garments and textile
 Construction
 Transportation
 Manufacturing
WCI helps ensure financial security for laborers and legal protection for employers.

4. Q: What is Fidelity Guarantee Insurance and how is it used in Bangladeshi businesses?

A:
Fidelity Guarantee Insurance protects employers against financial losses caused by dishonest
or fraudulent acts of employees, such as:
 Embezzlement
 Forgery
 Theft of cash or goods
It is widely used in:
 Banks
 Financial institutions
 Retail and large-scale enterprises
In Bangladesh, claims must include audited loss records, employee background, and evidence
of fraud. The policy typically excludes losses due to poor supervision or non-documented
cash handling.

5. Q: What types of Engineering Insurance policies are offered under Miscellaneous

Insurance in Bangladesh?
A:
Key Engineering Insurance policies in Bangladesh include:
 Contractor’s All Risks (CAR): Covers civil construction risks (bridges, roads)
 Erection All Risks (EAR): For mechanical installation projects (factories, turbines)
 Machinery Breakdown (MB): For fixed machinery in industries
 Boiler and Pressure Plant (BPP): For explosion risks in steam boilers
These are commonly used in public infrastructure, industrial projects, and power plants,
often as mandatory cover for project finance.

6. Q: What is Burglary and Theft Insurance and how does it apply in Bangladesh?
A:
Burglary Insurance provides coverage for:
 Theft following forcible and violent entry into premises
 Armed robbery
 Damage to property during burglary
Applicable to:
 Shops, warehouses, showrooms
 Offices and factories
In Bangladesh, insurers require:
 Police FIR
 List of stolen items
 Inventory proof
The policy does not cover shoplifting or employee theft, which falls under fidelity insurance.

7. Q: What is the structure of Liability Insurance in Bangladesh and what are its types?
A:
Liability Insurance covers legal liability arising from injury or damage to third parties.
Common types in Bangladesh:
 Public Liability Insurance: For businesses open to public (e.g., malls, hotels)
 Product Liability Insurance: For manufacturers and exporters
 Employer’s Liability Insurance: For workplace injuries not covered under WCI
 Professional Indemnity: For doctors, engineers, and consultants
These policies are crucial in litigious or export-sensitive sectors, and are increasingly being
demanded by foreign buyers and banks.

8. Q: How does Travel Insurance operate in Bangladesh?

A:
Travel Insurance offers protection during international or domestic travel. Typical coverage
includes:
 Accidental death or injury
 Medical emergencies
 Trip cancellation/delay
 Loss of passport or baggage
Travel insurance is often mandatory for visa applications (e.g., Schengen countries) and is
regulated by IDRA.
Policies are sold by:
  Licensed insurers
 Banks
 Travel agencies (as corporate agents)
Digital issuance through mobile apps and travel portals is rising in Bangladesh.

9. Q: What are the regulatory challenges in the Miscellaneous Insurance segment in

Bangladesh?
A:
Key challenges include:
 Low penetration and awareness of non-traditional insurance
 Under-pricing of risks due to competition
 Lack of actuarial pricing for emerging policies like cyber insurance
 High claim fraud, especially in theft and PA insurance
 Limited digital infrastructure for customized policy administration
IDRA is working on strengthening product standardization, digital monitoring, and training
programs to enhance professionalism.

10. Q: How are claims settled in Miscellaneous Insurance and what documents are generally
required?
A:
Claims settlement follows these general steps:
1. Immediate intimation to insurer
2. Submission of required documents, which may include:
o Police report (FIR)
o Medical certificates (for PA/travel)
o Loss reports or surveyor’s report
o Invoices or valuation reports
3. Appointment of loss adjuster/surveyor
4. Approval and payment
Claims are to be settled within 90 days as per IDRA guidelines. Delays must be justified, and
IDRA can intervene upon formal complaint.

✅ Summary of Key Miscellaneous Insurance Types in Bangladesh:

Type Main Coverage Areas

Personal Accident Death, disability from accident

Workmen's Compensation Worker injury/death on duty

Fidelity Guarantee Employee fraud or embezzlement

Engineering Insurance Construction, erection, machinery risks

 Type Main Coverage Areas

Burglary Insurance Theft after forced entry

Liability Insurance Third-party bodily injury or property damage

Travel Insurance Injury, medical emergency, delays during travel

🧾 Comparison Table: Life Insurance vs General Insurance in Bangladesh

Category Life Insurance General Insurance

Long-term contract (often over 10–25 Short-term contract (usually 1 year;

Nature of Contract
years or whole life) renewable annually)

Provides financial protection against Provides compensation for

Purpose
death and long-term savings loss/damage to property or liability

Must exist at inception and at the

Insurable Interest Must exist at inception only
time of loss

Human life (death, survival, Property, liability, accident, marine,

Type of Risk Covered
retirement) fire, etc.

Claims are uncertain (may or may not

Claim Occurrence Claims are certain (death is inevitable)
occur)

Sum Insured Determined by the proposer and Based on the actual value of property
Determination insurer or loss risk

On death or maturity, as per sum

Claim Settlement Basis On actual loss up to the sum insured
assured

Savings/Investment No savings component; only risk

Has a savings or investment element
Component coverage

Endowment, Whole Life, Term Life, Fire, Marine, Motor, Engineering,

Policy Examples
Child Plan Liability, Health, etc.

IDRA (Insurance Development and

Regulator in Bangladesh IDRA
Regulatory Authority)
 Category Life Insurance General Insurance

Minimum Paid-Up Capital BDT 300 million (as per IDRA

BDT 400 million (for general insurers)
(BD) regulations)

Popular Life, MetLife, Delta Life, Jiban Green Delta, Sadharan Bima, Reliance,
Main Providers
Bima Corporation Pioneer, Nitol, etc.

Optional; often through foreign Compulsory cession to Sadharan Bima

Reinsurance
reinsurers Corporation (SBC) (50%)

Policy Tenure Long-term (5–30 years or lifelong) Short-term (usually 12 months)

Premium Payment Monthly, quarterly, or annually Generally annual or single premium

✅ Summary:
 Life Insurance = Long-term + human life + savings + fixed benefit
 General Insurance = Short-term + property/liability + indemnity-based + actual loss
📝 Summary Table: Principles of Insurance in Bangladesh
Principle Description Relevance in Bangladesh

Mandatory under Insurance Act,

1. Utmost Good Faith Both insurer and insured must disclose all
2010; non-disclosure can void
(Uberrimae Fidei) material facts truthfully.
contract.

Required at policy inception (life

The insured must have a financial or legal
2. Insurable Interest insurance) and at loss (general
interest in the subject insured.
insurance).

Applies mainly to general

Insurance aims to compensate the actual loss,
3. Indemnity insurance; prohibits over-
not to profit the insured.
insurance or profit.

Prevents double recovery;

If multiple policies cover the same risk, the
4. Contribution common in property insurance in
insured can claim proportionately from each.
Bangladesh.

After indemnifying the insured, the insurer

Protects insurers’ rights; applies
5. Subrogation acquires the right to recover loss from a third
in general insurance claims.
party responsible.

6. Proximate Cause The immediate and effective cause of loss Key in claim settlement disputes
 Principle Description Relevance in Bangladesh

determines claim liability. under IDRA supervision.

Encouraged by IDRA to ensure

The insured must take reasonable steps to
7. Loss Minimization risk control and reduce claims
prevent or reduce loss.
fraud.

Insured must act promptly to minimize further Failure can lead to claim denial;
8. Mitigation of Loss
loss after an insured event. emphasized in policy terms.

Must be paid timely; non-

9. Premium The price paid by the insured for risk coverage.
payment leads to policy lapse.

Math Part:
1. Life Insurance: Simple Term Insurance Premium
Q: A 30-year-old man wants to buy a term life insurance policy for BDT 1,000,000 for 1 year.
The insurer charges a premium rate of 5 per 1000 sum assured. What is the annual premium?
Solution:
Premium = (Sum Assured / 1000) × Rate
= (1,000,000 / 1000) × 5 = 1000 × 5 = BDT 5,000

2. Life Insurance: Premium with Loading

Q: If the insurer loads 20% for expenses on the premium calculated above, what is the total
premium payable?
Solution:
Loading = 20% of 5,000 = 0.20 × 5,000 = 1,000
Total premium = 5,000 + 1,000 = BDT 6,000

3. General Insurance: Fire Insurance Premium

Q: A factory is insured for BDT 10,000,000 with a fire insurance rate of 0.2%. Calculate the
annual premium.
Solution:
Premium = Sum Insured × Rate
= 10,000,000 × 0.002 = BDT 20,000

4. General Insurance: Motor Insurance Premium

Q: A motor vehicle with a market value of BDT 1,200,000 is insured at a rate of 3%. What is the
premium?
Solution:
Premium = 1,200,000 × 0.03 = BDT 36,000
5. Life Insurance: Whole Life Insurance Premium
Q: If a whole life insurance policy for BDT 500,000 is priced at BDT 15 per 1000 sum assured
annually, calculate the premium.
Solution:
Premium = (500,000 / 1000) × 15 = 500 × 15 = BDT 7,500

6. General Insurance: Marine Cargo Insurance

Q: Cargo worth BDT 2,000,000 is insured at 0.5% rate. What is the premium?
Solution:
Premium = 2,000,000 × 0.005 = BDT 10,000

7. Life Insurance: Term Insurance Premium for Multiple Years

Q: A 25-year-old buys a 5-year term insurance policy of BDT 1,000,000. The annual premium
rate is BDT 6 per 1000. Calculate total premium payable if paid annually.
Solution:
Annual premium = (1,000,000 / 1000) × 6 = 1000 × 6 = 6,000
Total premium for 5 years = 6,000 × 5 = BDT 30,000

8. General Insurance: Burglary Insurance Premium

Q: A shopkeeper insures goods worth BDT 500,000 against burglary at 0.4%. What is the
premium?
Solution:
Premium = 500,000 × 0.004 = BDT 2,000

9. Life Insurance: Endowment Policy Premium

Q: For an endowment policy of BDT 1,000,000 with annual premium rate BDT 12 per 1000 sum
assured, what is the premium?
Solution:
Premium = (1,000,000 / 1000) × 12 = 1000 × 12 = BDT 12,000

10. General Insurance: Engineering Insurance Premium

Q: A construction machinery worth BDT 3,000,000 is insured under Contractor’s All Risk at
0.35%. Calculate the premium.
Solution:
Premium = 3,000,000 × 0.0035 = BDT 10,500
🧮 Lifetime Calculation in Life Insurance (Bangladesh Context)
In life insurance, lifetime calculation generally refers to estimating the premium or sum
assured based on the life expectancy, policy term, and age of the insured. This helps insurers
decide how much risk they are taking and what premium should be charged.

✅ Key Concepts in Lifetime Calculation

Term Meaning

Life Expectancy Average number of years a person is expected to live from a certain age.

Policy Term The number of years the insurance policy is active.

Mortality Rate Probability that a person of a certain age will die within one year.

Present Value of Future Used to calculate how much the insurer needs today to cover future
Benefits payouts.

🔢 Basic Example: Lifetime Risk Premium Calculation

Scenario:
 Age of insured = 35 years
 Term of policy = 20 years
 Sum assured = BDT 1,000,000
 Annual mortality rate at age 35 = 0.0018
 Premium is calculated on pure risk (no investment return)

Step-by-Step Calculation (Simplified):

1. Risk of death each year = Mortality rate × Sum assured
= 0.0018 × 1,000,000 = BDT 1,800 expected payout in year 1
2. Assuming same risk each year (simplified) for 20 years:
Annual pure premium ≈ BDT 1,800
👉 In reality, insurers use actuarial tables and present value concepts to adjust the premium
over time, accounting for:
 Increasing mortality risk with age
 Time value of money (discounting future payouts)
 Expenses and profit margins

🔄 Level Premium Calculation (Illustrative)

Insurers prefer to charge a level premium (same amount every year), which is calculated by:
Level Premium = Present Value of Future Benefits (PVFB) / Present Value of Premiums
(PVP)
Where:
 PVFB uses life expectancy and discounting
 PVP is the value of premiums to be collected over time

📈 Use of Actuarial Tables

In Bangladesh, insurers refer to Bangladesh Life Mortality Table, approved by IDRA, which
provides:
 Life expectancy
 Mortality rate by age
 Annuity factors
This helps determine premiums based on:
 Age
 Gender
 Term
 Type of policy (term, endowment, whole life)

🧮 Example with Actuarial Discounting (Simplified)

Let’s say:
 Age = 30
 Term = 10 years
 Death benefit = BDT 1,000,000
 Discount rate = 5%
 Mortality rate (simplified average over 10 years) = 0.0015
Then:
Expected present value of payout (EPV) = 1,000,000 × 0.0015 × Present value of ₹1 over 10
years @ 5%
= 1,500 × 7.722 (PV factor) ≈ BDT 11,583
So, to break even, insurer needs to charge at least BDT 11,583 in premiums (more when
including loading for expenses and profit).

📘 Conclusion
Lifetime calculation in life insurance involves:
 Estimating mortality risk
 Applying actuarial present value
 Leveling premiums over the term
 Using life tables specific to Bangladesh (IDRA approved)

🔍 1. What is actuarial science, and how is it applied in Bangladesh's insurance sector?

Answer:
Actuarial science is the discipline that applies mathematical, statistical, and financial theories to
assess risk in insurance, pensions, finance, and investments. In Bangladesh, actuaries:
  Calculate life and general insurance premiums.
 Determine reserves for future claims.
 Conduct solvency analysis of insurers.
 Design pension schemes and annuity products.
 Ensure regulatory compliance with IDRA rules and IFRS standards.

🔍 2. What regulatory body governs actuarial practices in Bangladesh?

Answer:
The Insurance Development and Regulatory Authority (IDRA) governs actuarial practices in
Bangladesh under the Insurance Act, 2010. It mandates that every life insurer must appoint a
certified actuary to:
 Prepare actuarial valuation reports.
 Certify solvency and reserve adequacy.
 Comply with disclosure norms under Schedule C of the Insurance Act.

🔍 3. What is the mortality table used in Bangladesh, and why is it important?

Answer:
Bangladesh uses the Bangladesh Life Table (e.g., BDT 2005–2010 or BDT 2010–2015) for
mortality assumptions. Mortality tables provide:
 Probability of death (qx) and survival (px) at each age.
 Basis for calculating premiums, reserves, and annuities.
These tables are essential for ensuring fairness in pricing and solvency in life insurance products.

🔍 4. How is Net Premium calculated using actuarial principles in life insurance?

Answer:
Net Premium = Expected Present Value of Future Benefits (EPVB)
= ∑ [Death benefit × Mortality rate × Discount factor]
For example:
If Sum Assured = BDT 500,000,
Age = 35, Term = 10 years,
Mortality rate = 0.002,
Discount rate = 5%,
Then approximate annual Net Premium = 500,000 × 0.002 × PV factor = BDT 9,000 (approx.)

🔍 5. What are the types of actuarial reserves, and which are used in Bangladesh?
Answer:
Types of reserves include:
 Unearned Premium Reserve (UPR) – for general insurance.
 Life Fund/Mathematical Reserve – for life policies.
 Claims Outstanding Reserve – for reported but unpaid claims.
In Bangladesh, life insurers are required to maintain a Mathematical Reserve under actuarial
certification to meet future liabilities, based on assumptions like mortality, interest, and lapse.

🔍 6. What role does an actuary play in product pricing in Bangladesh?

Answer:
Actuaries:
 Analyze risk exposure using demographic data.
 Apply mortality/morbidity rates and lapse assumptions.
 Add margins for expenses and profits.
 Ensure compliance with IDRA pricing regulations.
The actuary signs off on the “Pricing Certificate”, required before launching a new insurance
product in the market.

🔍 7. What is the solvency margin requirement for insurers in Bangladesh and how is it
actuarially assessed?
Answer:
Under IDRA regulations, life and general insurers must maintain a solvency margin — the
excess of assets over liabilities, to ensure financial stability. Actuarial assessment includes:
 Estimating technical provisions (reserves).
 Valuing assets using admissibility norms.
 Ensuring that Net Worth > Required Solvency Margin (usually 150% of required
reserves).

🔍 8. What actuarial exams or qualifications are recognized in Bangladesh?

Answer:
Recognized actuarial qualifications include:
 Institute and Faculty of Actuaries (IFoA - UK)
 Society of Actuaries (SOA - USA)
 Institute of Actuaries of India (IAI)
Bangladesh does not yet have its own actuarial institute, so actuaries typically qualify through
these international bodies.

🔍 9. What is lapse and persistency rate, and why are they important in actuarial models?
Answer:
 Lapse Rate: Percentage of policies that are discontinued before maturity.
 Persistency Rate: Percentage of policies that remain active.
These are crucial for pricing and reserve calculations. High lapse can reduce premium income
and affect profitability. Actuaries factor these into expected cash flows and profitability
projections.
🔍 10. How does an actuary help in managing insurance risk in Bangladesh?
Answer:
Actuaries manage risk by:
 Conducting stress testing and sensitivity analysis.
 Monitoring claim trends and loss ratios.
 Recommending reinsurance structures.
 Using stochastic models to predict future liabilities.
 Ensuring compliance with IFRS 17 for insurance contracts.
They serve as a bridge between technical analysis and strategic decision-making in insurance
companies.

✅ Bonus Tip:
If you're preparing for actuarial or insurance-related exams in Bangladesh, make sure to
understand:
 Bangladesh Insurance Act 2010
 IDRA rules and circulars
 Mortality and reserving practices

✍️Essay: Actuarial Science in Bangladesh

Introduction
Actuarial science is a discipline that applies mathematics, statistics, economics, and financial
theory to study uncertain future events, particularly those related to insurance and pension
systems. In Bangladesh, actuarial science is an emerging yet increasingly significant field,
especially in the context of the growing insurance and financial sectors. As the country develops
its risk-based regulatory framework, the role of actuaries is becoming essential in ensuring the
financial soundness of insurers, pension funds, and health schemes.

Development of Actuarial Science in Bangladesh

Historically, Bangladesh has relied heavily on foreign expertise for actuarial services, especially
for pricing life insurance products and determining reserves. However, over the past decade,
there has been a notable increase in awareness and interest in actuarial education and its
importance in financial risk management.
While Bangladesh does not yet have a national actuarial society, many actuaries working in the
country are qualified from international institutions such as:
 Institute and Faculty of Actuaries (IFoA), UK
 Society of Actuaries (SOA), USA
 Institute of Actuaries of India (IAI)
A number of universities, including the University of Dhaka and Jahangirnagar University, offer
courses in actuarial mathematics and statistics to foster local talent.
Role of Actuaries in Bangladesh
In Bangladesh, actuaries play a critical role in the life and general insurance sectors. Their
responsibilities include:
 Pricing of insurance products (life, health, motor, etc.)
 Estimating policyholder liabilities and setting up reserves
 Calculating premiums using mortality, morbidity, and lapse assumptions
 Valuing pension and provident funds
 Ensuring solvency compliance and stress testing under IDRA regulations
For life insurance companies, the appointment of an actuary is mandatory under the Insurance
Act 2010, and actuarial reports must be submitted annually to the Insurance Development and
Regulatory Authority (IDRA).

Regulatory Framework and IDRA's Role

The Insurance Development and Regulatory Authority (IDRA) is the central body that
regulates actuarial practices in Bangladesh. As per the Insurance Act, all life insurance
companies must maintain actuarially certified reserves, solvency margins, and submit actuarial
valuation reports.
In recent years, IDRA has moved towards aligning with international accounting standards like
IFRS 17, which places greater responsibility on actuaries to assess contract liabilities, expected
profits, and future cash flows under risk-adjusted models.

Challenges Facing Actuarial Science in Bangladesh

Despite its growing importance, actuarial science in Bangladesh faces several challenges:
 Shortage of qualified actuaries: Very few fully qualified actuaries are available locally.
 Lack of awareness: Many organizations and students are unaware of the career scope in
this field.
 High cost of actuarial exams: International exams are expensive and rigorous, limiting
access.
 Limited institutional support: Bangladesh lacks a local actuarial society or formal
accreditation body.

Future Prospects
The future of actuarial science in Bangladesh is promising. With the expansion of life, health,
and microinsurance markets, as well as upcoming pension reforms, the demand for actuaries will
continue to grow. Increased collaboration between universities, insurers, and global actuarial
bodies can help bridge the talent gap.
Establishing a Bangladesh Actuarial Society, subsidizing exam fees, and creating internship
pathways can accelerate the development of a skilled local actuarial workforce.
Conclusion
Actuarial science is a cornerstone of financial risk management, and in Bangladesh, it is
gradually emerging as a crucial profession for economic stability. With proper support from
regulators, educational institutions, and the private sector, actuarial science can thrive and
contribute significantly to the sustainable development of Bangladesh’s insurance and pension
systems.