Fire Insurance is a “named-peril” policy covering specific fire and allied hazards, whereas Industrial All Risk (IAR) is a comprehensive “open-peril” umbrella policy covering all sudden, unforeseen physical damage and business interruption unless explicitly excluded.
If you run a manufacturing plant, a textile mill, or a large production facility in Bangladesh, insuring your property is likely one of your largest fixed overheads. But holding an insurance policy does not automatically mean your business is safe from financial disaster. Many factory owners discover too late that a standard fire policy leaves massive blind spots.
When a major accident occurs such as a sudden machine breakdown, an internal electrical fault, or a multi-month production shutdown the difference between having basic fire coverage and an Industrial All Risk (IAR) policy can mean surviving a crisis or facing multi-crore BDT balance sheet losses.
To help you quickly evaluate your risk exposure, here is how standard Fire Insurance compares directly against an Industrial All Risk (IAR) policy across key operational and financial metrics:
| Core Attribute | Standard Fire Insurance | Industrial All Risk (IAR) Insurance |
| Basis of Coverage | Named Perils: Covers only specific hazards listed in the policy wording (e.g., fire, lightning, explosion). | Open / All Risks: Covers all sudden and unforeseen physical loss or damage, except what is explicitly excluded. |
| Machinery Breakdown (MBD) | Excluded. Requires a separate, standalone engineering policy. | Integrated directly into the main material damage section. |
| Accidental Physical Damage | Not covered unless caused by a listed hazard. | Fully covered for accidental damage on the factory floor. |
| Business Interruption (FLOP/MLOP) | Rarely bundled; requires separate, complex extensions. | Core Section II coverage protecting gross profits and fixed overheads. |
| Burglary & Theft | Requires a separate burglary insurance policy. | Often included for fixed industrial assets and contents within the premises. |
| Minimum Sum Insured Threshold | Available for any commercial value, from small shops to large plants. | Typically requires a high aggregate sum insured (often BDT 50 Crore to 100 Crore+ based on insurer norms). |
| Claim Burden of Proof | The insured must prove that a specific covered peril directly caused the loss. | The insurer must prove that a specific policy exclusion applies to deny the claim. |
| Ideal Target Business | Warehouses, retail spaces, small workshops, and general SMEs. | Large RMG units, pharmaceutical plants, power generation, cement, and steel mills. |
Standard Fire and Allied Perils Insurance operates under the Central Rating Committee (CRC) and IDRA tariff framework in Bangladesh as the baseline property protection required by commercial banks and financial institutions.
A standard fire policy is built around a specific list of hazards. By default, it protects your physical structures, plant, machinery, and raw material inventories against:
While a basic fire policy satisfies bank compliance when you take out a term loan, it leaves significant operational vulnerabilities. For instance, if an electrical short circuit occurs deep inside a high-value CNC machine or transformer without producing open flames, a standard fire policy will often deny the claim because no actual “fire” broke out. Similarly, accidental operator errors, sudden mechanical fractures, or internal pressure failures are entirely excluded under basic fire terms.
Green Delta’s Industrial All Risk Insurance policy is a comprehensive package policy designed for large-scale manufacturing and infrastructure projects in Bangladesh, combining property damage, machinery breakdown, and consequential loss under a single wording.
The core advantage of IAR is its “open peril” framework. Instead of asking “Is this specific cause of damage listed on our policy?”, an IAR policy covers any sudden, accidental, and unforeseen physical loss affecting your insured property, unless the cause is specifically listed in the exclusion clause (such as war, nuclear risk, or wear and tear). This eliminates the dangerous gaps that usually exist when a business tries to stitch together separate Fire, Burglary, and Machinery Breakdown policies from different insurers.
Property damage is only half the battle when a disaster strikes. If a major fire or explosion shuts down your production lines for six months, your revenue stops, but your financial obligations do not. Section II of an IAR policy protects your Gross Profit, covers ongoing standing charges (such as worker wages, bank loan interest, and utility minimum charges), and pays for the increased cost of working while you rebuild your facility.
Under a standard fire policy, if your factory suffers a mysterious structural collapse or internal equipment failure, you must prove beyond doubt that a covered named peril caused it—a difficult task when evidence is charred or destroyed. Under an IAR policy, the legal dynamic shifts in your favor: you only need to prove that accidental physical loss occurred during the policy period. The burden then shifts to the insurance company and their surveyors to prove that an explicit policy exclusion caused the damage.
Operating industrial facilities in bustling manufacturing hubs like Gazipur, Ashulia, Narayanganj, or the Chattogram/Sitaram belts brings unique risk profiles. Evaluating these five operational differences will clarify why upgrading matters:
Consider a real-world manufacturing challenge: A high-voltage power transformer inside your factory yard suffers an internal electrical arcing fault, exploding and sending metal shrapnel into adjacent production lines without catching fire. Under a Standard Fire policy, adjusters may argue there was no ignition, resulting in a rejected claim. Under an IAR policy, the sudden physical impact and electrical damage are fully embraced under the all-risk framework.
When businesses buy separate Fire and Machinery Breakdown policies from different providers, a dangerous “finger-pointing” game often starts after an accident. If a turbine overheats and causes a localized fire, the fire insurer blames the machinery breakdown, while the engineering insurer blames the fire. An IAR policy merges these coverages under one roof, preventing multi-agency disputes during a crisis.
Replacing a damaged roof or buying a new motor is straightforward, but what happens to your buyer orders and cash flow while the factory sits idle? Basic fire insurance replaces the steel and mortar, but IAR protects your business survival by keeping payroll and bank loan commitments covered while operations are paralyzed.
IAR policies are not meant for small retail shops or corner warehouses. In the local Bangladeshi insurance market, underwriters typically restrict IAR policies to large-scale enterprises with substantial asset bases (generally starting around a total sum insured of BDT 50 Crore to 100 Crore+). Underwriters will also demand rigorous risk inspection reports before approving the cover.
Managing multiple policies means juggling different renewal dates, varying deductibles, and conflicting clauses. IAR streamlines your risk management by consolidating your properties, machinery, stocks, and business interruption into a single master policy document, simplifying premium payments and claim adjustments.
Insurance in Bangladesh does not operate in a vacuum; it is strictly regulated to protect the financial stability of the market.
Property and fire insurance premium rates in Bangladesh are heavily influenced by tariffs set through the Central Rating Committee (CRC) under the supervision of the Insurance Development and Regulatory Authority (IDRA). Furthermore, state-owned Sadharan Bima Corporation (SBC) plays a mandatory role in reinsuring a significant portion of large commercial risks, ensuring that local insurers have the financial backing to handle multi-crore claims.
While IAR policies cost more upfront than basic fire insurance due to their broader scope, you can optimize your premium by investing in loss-prevention measures. Insurers reward factories that comply with the Bangladesh National Building Code (BNBC), maintain NFPA-standard fire hydrant and sprinkler systems, secure safety certifications, and accept a reasonable voluntary deductible (excess) to share minor losses.
When deciding which route to take, assess your operational scale and risk exposure:
Even with a comprehensive IAR policy, claims can be delayed or rejected if basic administrative safeguards are ignored:
Choosing between Standard Fire Insurance and an Industrial All Risk (IAR) policy depends on your operational scale and risk exposure. While basic fire insurance meets bank loan requirements, its “named-peril” coverage leaves high-value factories exposed to internal machinery breakdowns, electrical faults, and costly downtime.
For large-scale manufacturing facilities, RMG units, and industrial enterprises in Bangladesh, comprehensive solutions like Green Delta Insurance Industrial All Risk policy deliver robust “open-peril” protection under a single master document. By bundling material damage, machinery failure, burglary, and business interruption, IAR ensures an operational crisis won’t derail your balance sheet.
Don’t leave your factory’s future to chance. Consult a licensed insurance advisor or get a customized quote for your business operations.
Commercial banks in Bangladesh traditionally mandate a Standard Fire and Allied Perils policy to protect collateralized property. However, for large project-financed manufacturing plants, progressive lenders increasingly accept or encourage IAR policies because they offer superior risk mitigation across both physical assets and business interruption.
No. Standard Fire Insurance only covers damage if an actual fire originates from the short circuit and spreads. If an electrical surge or internal short circuit destroys a motor or control panel without open flames, a standard fire policy will not pay out.
While there is no rigid statutory law set by IDRA, local insurance underwriters generally require a minimum total sum insured starting around BDT 50 Crore to 100 Crore before issuing a customized Industrial All Risk policy.
Market value subtracts depreciation based on the age and wear of your machinery, leaving you with far less than what it costs to buy new equipment. Reinstatement value covers the full cost of purchasing brand-new, equivalent machinery and rebuilding your factory at current market prices, provided your sum insured reflects true replacement costs.
Feedback
Download
Subsidiaries
SDG