Banks with over 5pc NPL not eligible for bancassurance

Banks cannot have non-performing loans (NPL) at a level of more than 5% to get approval for bancassurance, said the Bangladesh Bank.

The central bank issued “Bancassurance Guidelines for Banks” on Wednesday determining the level of NPL a bank can have to launch bancassurance products.

Bangladesh Bank allowed banks for bancassurance – an arrangement for selling insurance products through banks – to increase insurance penetration in the country. The central banks issued a circular in this regard on 12 December.

The guidelines read, “No bank shall engage in bancassurance, sale of insurance without getting prior approval from the Bangladesh Bank and obtaining a corporate agent licence from the Insurance Development and Regulatory Authority (IDRA).”

“A bank shall not continue agreements with more than three life insurance and three non-life insurance companies at the same time,” the guidelines said.

To get an approval for bancassurance, the banks shall comply with some criteria which include the capital to risk-weighted asset ratio (CRAR) with capital conservation buffer (CCB) shall not be less than 12.50% provided that the%age to be fixed by Bangladesh Bank from time to time.

Banks shall meet the credit rating not less than Bangladesh Bank rating grade 2 defined at the guidelines on Risk Based Capital Adequacy and the minimum CAMELS rating of 2 of the Bangladesh Bank.

“The level of net NPL shall not be more than 5%, shall have positive net profit for the last three consecutive years, a viable bancassurance business plan and review mechanism which must be approved by the Board of Directors,” the guidelines read.

The central bank said the banks shall have a competent and suitable manpower to operate a dedicated bancassurance unit/wing and a declaration signed by the managing director of the concerned bank in this regard.

It also said any amendment to the bancassurance agreement shall be subject to approval of Bangladesh Bank.

Banks shall not include any exclusivity clause (entry/exit barrier) in bancassurance agreement, no matter what name or title it may be called, with any insurer, the central bank guidelines stated.

Upon expiration, the banks shall notify Bangladesh Bank of the renewal or extension or discontinuation of the bancassurance agreement.

“Banks, for termination or discontinuation, shall notify the Bangladesh Bank stating the reason(s) for the termination,” the guidelines read.

In case of renewal or amendment of the existing agreement, the banks shall inform the Bangladesh Bank in writing within 15 days after the renewal or amendment.

About claim processing, Bangladesh Bank said that the settlement of claims shall be the responsibility of the insurer with obligation for some arrangements.

As part of such arrangements, the banks shall assist the insured person or nominee (s) as a facilitator in processing the claim as applicable.

The means of communication with the insurer for the settlement of the claim shall be clearly stated in the bancassurance agreement.

The bank shall provide adequate information to the claimant about the means of communication with the insurer for submission of claim.

Bank, at the request of the insurer, shall provide all necessary assistance in collecting the necessary documents and information regarding settlement of the claim.

The guidelines further read, “The insurer shall settle the claim directly with the insured person or nominee (s), whichever is applicable, under intimation to the bank.”