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Corporate - June 15, 2023

Insurance for buildingsto be mandatory

Mahfuja Mukul: There are frequent incidents of serious fire in buildings happening in the country. The buildingsare also collapsing. The building owners are facing huge damages. Apart from this, even though there is not much damage to buildings in the earthquake, the country is at risk of a major earthquake, but experts have been saying it for a long time.
In this context, the government has taken the initiative to bring all public and private buildings under insurance compulsorily.
Earlier too, the government had taken the initiative to bring buildings, especially government multi-storied buildings, under insurance. But that initiative did not see the light of day. Now the government has again emphasized on this issue. In the meantime, instructions have been given to the Insurance Development and Regulatory Authority (IDRA) from the Financial Institutions Department of the Ministry of Finance.
IDRA requested the building control ministries to write to take action in this regard. In this context, a letter was sent from the Financial Institutions Department to the Secretary of the Local Government Department and the Secretary of the Ministry of Housing and Public Works on May 18 requesting to take the initiative to make building insurance compulsory.
Buildings in the capital are approved by the Capital Development Authority (RAJUK), which is under the Ministry of Housing and Public Works. Apart from this, Khulna Development Authority (KHAUK), Rajshahi Development Authority (RAUK), Chittagong Development Authority (CHAUK) and Cox’s Bazar Development Authority (KAUK) give permission to construct buildings. There are 12 City Corporations and 329 Municipalities. In cities or municipal areas where there is no development authority, the approval is given by the city corporation and municipality, which is under the Ministry of Local Government.
Local Government Department Secretary Muhammad Ibrahim told Daily Industry, “We haven’t done any analysis on it (compulsory insurance of all buildings) yet.” It’s a big decision. Whether adequate insurance policies are available in Bangladesh for such a large number of buildings. If I want to buy a product, I have to see if it is readily available in the market.’
He said, ‘Also, there should be an outline of how we will insure all the buildings. After the budget is passed, we will think about it extensively.
In the meantime, letters have been sent to the Mayor and Deputy Commissioners (DC) of the municipality to see what can be done in this regard, the secretary said, ‘Let’s see what their opinion is. Then we will analyze how to implement it. Later, based on our analysis, maybe we will sit with the finance ministry.
However, when asked about this, the Secretary of the Ministry of Housing and Public Works Kazi Washi Uddin told, “I have not received such a letter yet.” I haven’t played it yet, I can tell after it happens.’
In a letter written by the Financial Institutions Department to the Local Government Department and Public Works Secretary, it is said that the number of multi-storey buildings is gradually increasing as a result of extensive development activities in various metropolises including the capital Dhaka. As a result, the danger of buildings increases. Due to fire due to short circuit in several buildings, there is heavy loss of property and life. There is always a risk of loss of property and life in earthquakes and fires. Due to geological features, large areas of Bangladesh, including the capital Dhaka, are identified as earthquake-prone areas. Insurance can play a very effective role in dealing with the risk of such massive losses.
It is also said that the finance minister has given instructions to take steps to bring all public and private buildings under insurance for various risks including fire and earthquake and financial security of privately owned institutions. If the owners of all the buildings/multi-storied buildings in the country are affected by major calamities or accidents including fire and earthquake, the financial security of the concerned person or organization will be ensured by being covered by the insurance.
In this situation, the letter requested to take necessary measures to bring all the public and private buildings of the country under compulsory insurance.
Meanwhile, if the insurance of public and private buildings is mandatory, the insurance companies, the government and the building owners all will benefit. They say that if the insurance of public-private high-rise buildings is made compulsory, the business of the general insurance sector will increase by 30-40 percent. This will increase the contribution of insurance to the Gross Domestic Product (GDP). At the same time, the insurance market will grow. Besides, the revenue income of the government will increase and the owners will get compensation in case of damage to the building.
They also say that the insurance companies in the country are fully prepared to insure public and private buildings. In this regard there is no lack of capacity of insurance companies. If necessary, the insurance companies of the country can take the insurance and re-insure the insurance outside the country.
Bangladesh General Insurance Company (BGIC) Chief Executive Officer (CEO) Ahmed Saifuddin Chowdhury told that if the government takes the initiative to make insurance of public and private high-rise buildings mandatory, then it is a very good initiative. Doing so will increase the insurance coverage. Premium income of insurance companies will increase. And if the premium income increases, the revenue income of the government will increase. Insurance contribution to GDP will increase. On the other hand, those who take the policy can be rest assured that in case of any damage to their house, they can recover through insurance claims.
He said that if the insurance of public and private buildings is made compulsory, the business of general insurance companies will increase in a big way. I think the business of general insurance companies will increase by 30-40 percent. If this is done, it will be a great achievement.
People’s Insurance CEO SM Azizul Hossain said that private insurance companies cannot insure multi-storied government buildings. However, private insurance companies can be insured buildings that are privately owned. If it (building insurance) is mandatory, then we can insure it. But even if we tell someone to be insured your building, they don’t want to do it. We have tried a lot in this regard, but no one does insurance. Building insurance is not available as there is no obligation. Now if the government makes it mandatory, then you will see that multi-storied buildings will come under insurance. It will benefit all parties.
When asked whether the general insurance companies doing business in our country are capable of insuring the number of multi-storied buildings in the country, he said, of course our companies have that capability. We have 43 general insurance companies, each insurance company is very old. Companies will share the risk (risk) with insurance. Reinsurance will take coverage from outside. Domestic insurance companies will not have any problem in getting insurance for public and private buildings and will not have any problem in paying the claim.
He also said, it is a very good initiative. This will increase the business of general insurance companies. Because there are many high-rise buildings in the country now. The image of the country has changed. Every district has a lot of high-rise buildings. This will open up a way to increase the business of insurance companies, as well as the building owners will also get benefits.
Bidhu Bhushan Chakraborty, CEO of Asia Pacific Insurance told, if the insurance of public-private high-rise buildings is made mandatory, it will have a huge positive impact on the general insurance sector. I think the premiums of general insurance companies will increase by at least Tk 50 crore. If the government takes this initiative, it will be a very good initiative.
He said, our insurance companies will not have any problem to take insurance of the building. Insurance companies do not keep insurance policies entirely to themselves. Reinsuring the rest by keeping Tk 2 crore for itself. That is, the risk is placed on the shoulders of others. If the insurance company does the reinsurance properly, no matter how many claims arise there will be no problem. But danger if not re-insured. And unless there’s a major earthquake, insurance companies don’t have to pay out as many claims.
Earlier on January 18 this year, the Insurance Development and Regulatory Authority (IDRA) wrote to the Secretary of the Financial Institutions Department. In that letter, it is said that the ongoing insurance plans to mitigate the risk of the building are – Fire Insurance, Earthquake Insurance, Cyclone Insurance, Flood Insurance, All Risk Insurance etc. If the owners of all buildings or multi-storied buildings in the country are affected by major disasters or accidents including fire and earthquake, the financial security of the concerned person or organization will be ensured due to being covered by the insurance.
Earthquake insurance is mandatory in many countries around the world, such as Iceland, Romania, the Swiss Canton of Zurich and Turkey (within municipal areas). IRDA also said that fire and earthquake insurance schemes are also in place in France, New Zealand, Spain and Chinese Taipei.
In this situation, IDRA’s letter requested to send letters to the Ministry of Housing and Public Works (Rajuk and National Housing Authority) and local government departments (City Corporations) to implement the directives of the Finance Minister to cover the countrywide public and private buildings under insurance compulsorily.
An official of the Financial Institutions Department told on condition of anonymity that it was originally a decision of the Cabinet meeting in this regard. Prime Minister’s Directive – To bring all properties under insurance. In that context General Insurance Corporation and IDRA were asked to take action. They requested to send a letter to the concerned. Our Insurance Act also provides for immovable property insurance.
He also said that it is being said to insure all types of multi-storied and general buildings. Development projects are also covered by insurance during the project period. Now that premises are insured, the big companies are doing it. The Department of Financial Institutions will look into the matter of insurance. But those who have buildings should come forward. They need to feel that the building needs to be insured. That is why the letter has been given. We have the legal basis to insure buildings. If the government makes it mandatory, then it will be seen that the companies have made policies as per the need.
The official also said, ‘These two ministries give all the approvals for the building. If they say they won’t approve the building if they don’t insure it, that’s it. If the government decides, the insurance companies will sit with various opportunities to catch customers.

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