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Different Types of Insurance Products for Loan Security.

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Md. Mostahidur Rahman, CDCS

Insurance is a financial product that provides protection against losses resulting from unexpected events. It is a risk-management tool that provides financial compensation for losses caused by accidents, fire, illness, death, natural disasters, and other unexpected events. Insurance helps protect individuals and businesses from financial losses due to unforeseen circumstances.  On the other hand, Loan security can be described as Whether someone need to borrow money to grow their business, acquire assets or meet large or everyday expenses, a lender/ bank will almost always ask for security before they advance a loan in order to minimise their risk and ensure lender/ bank can enforce the loan if you fail to pay.

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Different Types of Insurance Products for Loan Security. Md. Mostahidur Rahman, CDCS
What do we understand about insurance & Loan security u Insurance is a financial product that provides protection against losses resulting from unexpected events. It is a risk-management tool that provides financial compensation for losses caused by accidents, fire, illness, death, natural disasters, and other unexpected events. Insurance helps protect individuals and businesses from financial losses due to unforeseen circumstances. u On the other hand, Loan security can be described as Whether someone need to borrow money to grow their business, acquire assets or meet large or everyday expenses, a lender/ bank will almost always ask for security before they advance a loan in order to minimise their risk and ensure lender/ bank can enforce the loan if you fail to pay.
A brief history of Insurance Insurance sector in Bangladesh emerged after independence with 2 nationalized insurance companies- 1 Life & 1 General; and 1 foreign insurance company. In mid 80s, private sector insurance companies started to enter in the industry and it got expanded. Now days, 62 companies are operating under Insurance Act 2010. Out of them- 18 Are Life Insurance Companies Including 1 Foreign Company And 1 Is State-Owned Company, 44 General Insurance Companies Including 1 State-Owned Company. The Insurance Development and Regulatory Authority (IDRA) is the regulatory body that oversees the insurance industry in Bangladesh. Source: https://www.bb.org.bd/en/index.php/financialactivity/insurance
Types of insurance companies and aggregators in Bangladesh In Bangladesh, there are both insurance companies and insurance aggregators that provide a range of products and services to individuals and businesses. Insurance companies offer a variety of products, including life, health, motor, and travel insurance. • Life insurance • General Insurance • Reinsurance • Micro-insurance • Takaful or Islamic insurance.
General Insurance Products Within numerous types of General Insurance following Products is being commonly used for Loan Security. u Fire and Allied Peril Insurance u Motor Insurance u Marine Insurance
Fire and Allied Peril Insurance All policies issued under the heading of Fire Insurance. It primarily aims at providing protection against financial losses arising out of the operation of fire or certain other specified perils. The subject matter of insurance is usually: u Building u Plant & Machinery u Furniture, Fixture and fittings u Goods and Merchandise u Stocks of all kinds Direct risks covered under standard fire insurance policy: Accidental fire, lightning & Explosion (Boilers or gas used for domestic purposes only). The perils covered by the policy in its normal terms are: u Fire: Whether resulting from explosion or otherwise. u Lightning: Whether fire results or not. u Explosion: Boiler used or gas used
Fire and Allied Peril Insurance (Continued) In addition to the above, this Policy also generally covers the following forms of damage :- u Damage during or immediately following a fire caused by Smoke, Scorching, Falling walls and the like u Damage caused by a fire brigade or other competent authority in discharge of their duty including : • Damage caused by water or other extinguishing agents employed. • Damage caused by the blowing up of buildings to prevent the spread of a configuratio u Damage to property while being removed from a building or immediately after its removal from burning building caused by exposure to weather, provided the removal was justified. Additional risks covered on payment of additional premium: Riot and strike damage (RSD), Explosion damage (including commercial purpose), Malicious damage., Earthquake, Cyclone, Flood.
Motor Insurance (1) Private Car (2) Commercial Vehicle (3) Motor Cycle Comprehensive Policy (What it Covers): 1. By fire, explosion, self-ignition or lighting. 2. By burglary, house-breaking or theft. 3. By riot & strike including malicious and terrorist activities. 4. By earthquake (fire and shock damage). 5. By flood, typhoon, hurricane, storm, inundation, cyclone, hailstorm, frost, tempest. 6. By accidental external means. 7. Whilst in transit by road, rail, inland waterway, lift, elevator or air. 8. Act liability insurance risks.
Marine Insurance u Marine cargo insurance coverage is given to import of all goods from abroad and inland transport by steamer/lorry/air. u The coverage includes different risks associated with the import of goods from one port to another either by sea, air or by rail, road. We also provide transit insurance cover for the carriage of goods inside the country. Hull Insurance: Under the hull insurance policy, the coverage is given to comprehensive risks for the vessels and total loss of any package. Vessels may be stranded, grounded, sunk or capsized and any package may be lost overboard or dropped whilst loading on to, or unloading from, vessel, we pay the amount equivalent to the estimated loss.
Insurance in International Trade A requirement in a credit for the presentation of an insurance document, such as an insurance policy, insurance certificate or declaration under an open cover, means that UCP 600 article 28 is to be applied in the examination of that document.
Sample Insurance Policy
BANCASSURANCE Bancassurance is a partnership between banks and insurance companies where banks acts as a corporate agent to sell insurance products through its distribution channels to its customer base. , Bancassurance business holds immense potential for banks as there is a huge untapped growth opportunity in the insurance industry. EBL like other bank is offering a wide range of financial products and one-stop solution for customer’s financial needs, Bancassurance business would create more cross-selling opportunities as well as ensure optimum use of existing business channel. Now Eastern Bank PLC is collaborating with u Green Delta Insurance u MetLife Products Source: https://www.ebl.com.bd/retail/ebl-bancassurance
Security is a Priority, Not an Option. I am so grateful for your patience and willingness to help me, Thanks.

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Different Types of Insurance Products for Loan Security.

  • 1. Different Types of Insurance Products for Loan Security. Md. Mostahidur Rahman, CDCS
  • 2. What do we understand about insurance & Loan security u Insurance is a financial product that provides protection against losses resulting from unexpected events. It is a risk-management tool that provides financial compensation for losses caused by accidents, fire, illness, death, natural disasters, and other unexpected events. Insurance helps protect individuals and businesses from financial losses due to unforeseen circumstances. u On the other hand, Loan security can be described as Whether someone need to borrow money to grow their business, acquire assets or meet large or everyday expenses, a lender/ bank will almost always ask for security before they advance a loan in order to minimise their risk and ensure lender/ bank can enforce the loan if you fail to pay.
  • 3. A brief history of Insurance Insurance sector in Bangladesh emerged after independence with 2 nationalized insurance companies- 1 Life & 1 General; and 1 foreign insurance company. In mid 80s, private sector insurance companies started to enter in the industry and it got expanded. Now days, 62 companies are operating under Insurance Act 2010. Out of them- 18 Are Life Insurance Companies Including 1 Foreign Company And 1 Is State-Owned Company, 44 General Insurance Companies Including 1 State-Owned Company. The Insurance Development and Regulatory Authority (IDRA) is the regulatory body that oversees the insurance industry in Bangladesh. Source: https://www.bb.org.bd/en/index.php/financialactivity/insurance
  • 4. Types of insurance companies and aggregators in Bangladesh In Bangladesh, there are both insurance companies and insurance aggregators that provide a range of products and services to individuals and businesses. Insurance companies offer a variety of products, including life, health, motor, and travel insurance. • Life insurance • General Insurance • Reinsurance • Micro-insurance • Takaful or Islamic insurance.
  • 5. General Insurance Products Within numerous types of General Insurance following Products is being commonly used for Loan Security. u Fire and Allied Peril Insurance u Motor Insurance u Marine Insurance
  • 6. Fire and Allied Peril Insurance All policies issued under the heading of Fire Insurance. It primarily aims at providing protection against financial losses arising out of the operation of fire or certain other specified perils. The subject matter of insurance is usually: u Building u Plant & Machinery u Furniture, Fixture and fittings u Goods and Merchandise u Stocks of all kinds Direct risks covered under standard fire insurance policy: Accidental fire, lightning & Explosion (Boilers or gas used for domestic purposes only). The perils covered by the policy in its normal terms are: u Fire: Whether resulting from explosion or otherwise. u Lightning: Whether fire results or not. u Explosion: Boiler used or gas used
  • 7. Fire and Allied Peril Insurance (Continued) In addition to the above, this Policy also generally covers the following forms of damage :- u Damage during or immediately following a fire caused by Smoke, Scorching, Falling walls and the like u Damage caused by a fire brigade or other competent authority in discharge of their duty including : • Damage caused by water or other extinguishing agents employed. • Damage caused by the blowing up of buildings to prevent the spread of a configuratio u Damage to property while being removed from a building or immediately after its removal from burning building caused by exposure to weather, provided the removal was justified. Additional risks covered on payment of additional premium: Riot and strike damage (RSD), Explosion damage (including commercial purpose), Malicious damage., Earthquake, Cyclone, Flood.
  • 8. Motor Insurance (1) Private Car (2) Commercial Vehicle (3) Motor Cycle Comprehensive Policy (What it Covers): 1. By fire, explosion, self-ignition or lighting. 2. By burglary, house-breaking or theft. 3. By riot & strike including malicious and terrorist activities. 4. By earthquake (fire and shock damage). 5. By flood, typhoon, hurricane, storm, inundation, cyclone, hailstorm, frost, tempest. 6. By accidental external means. 7. Whilst in transit by road, rail, inland waterway, lift, elevator or air. 8. Act liability insurance risks.
  • 9. Marine Insurance u Marine cargo insurance coverage is given to import of all goods from abroad and inland transport by steamer/lorry/air. u The coverage includes different risks associated with the import of goods from one port to another either by sea, air or by rail, road. We also provide transit insurance cover for the carriage of goods inside the country. Hull Insurance: Under the hull insurance policy, the coverage is given to comprehensive risks for the vessels and total loss of any package. Vessels may be stranded, grounded, sunk or capsized and any package may be lost overboard or dropped whilst loading on to, or unloading from, vessel, we pay the amount equivalent to the estimated loss.
  • 10. Insurance in International Trade A requirement in a credit for the presentation of an insurance document, such as an insurance policy, insurance certificate or declaration under an open cover, means that UCP 600 article 28 is to be applied in the examination of that document.
  • 12. BANCASSURANCE Bancassurance is a partnership between banks and insurance companies where banks acts as a corporate agent to sell insurance products through its distribution channels to its customer base. , Bancassurance business holds immense potential for banks as there is a huge untapped growth opportunity in the insurance industry. EBL like other bank is offering a wide range of financial products and one-stop solution for customer’s financial needs, Bancassurance business would create more cross-selling opportunities as well as ensure optimum use of existing business channel. Now Eastern Bank PLC is collaborating with u Green Delta Insurance u MetLife Products Source: https://www.ebl.com.bd/retail/ebl-bancassurance
  • 13. Security is a Priority, Not an Option. I am so grateful for your patience and willingness to help me, Thanks.