The Financial Institutions Division (FID) has proposed removing a provision from the Insurance Corporation Act 2019 that mandates non-life insurers in Bangladesh to cede half of their reinsurance business to the state-owned Sadharan Bima Corporation (SBC), reported the Financial Express.
The move follows recommendations from the Insurance Development and Regulatory Authority (IDRA), which cited low claim settlement ratios in the sector.
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According to IDRA data, the country’s non-life insurance sector had a claim settlement ratio of only 35.54% as of December 2023.
Research initiated by the IDRA chairman identified mandatory reinsurance with SBC as a key factor behind these low figures.
The findings suggested that obliging all 42 non-life general insurers to reinsure through SBC led to inefficiencies in claim settlements.
The proposed amendment to the Insurance Corporation Act 2019 aims to address these issues.
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By GlobalDataHowever, the suggestion has caused concern among SBC staff.
Employees of the corporation have publicly protested against the proposal, arguing that it threatens SBC’s existence and urging lawmakers not to implement changes before a new government is elected.
Speaking to the Financial Express, IDRA representatives stated that if enacted, the changes could improve both claim settlement rates and the flow of foreign capital into Bangladesh.
Sector insiders also pointed out that SBC’s lack of an internationally recognised credit rating has hindered access to foreign funds for development projects, the report added, citing sources.
Audited figures from the IDRA up to December 2024 show that SBC owes more than Tk14bn ($114.78m) to insurers who have yet to receive payments.
Conversely, insurers reportedly owe Tk9.28bn to SBC in unpaid premiums.
SBC general manager S M Shah Alom attributed delays in settling claims to missing documentation in claim files and also noted that insurers owed money to SBC.
The IDRA argues that ending mandatory reinsurance with SBC could also strengthen private reinsurers and facilitate entry for foreign reinsurers into Bangladesh’s market.
