The Monetary Establishments Division (FID) has proposed eradicating a provision from the Insurance coverage Company Act 2019 that mandates non-life insurers in Bangladesh to cede half of their reinsurance enterprise to the state-owned Sadharan Bima Company (SBC), reported the Monetary Specific.
The transfer follows suggestions from the Insurance coverage Improvement and Regulatory Authority (IDRA), which cited low declare settlement ratios within the sector.
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In line with IDRA knowledge, the nation’s non-life insurance coverage sector had a declare settlement ratio of solely 35.54% as of December 2023.
Analysis initiated by the IDRA chairman recognized obligatory reinsurance with SBC as a key issue behind these low figures.
The findings urged that obliging all 42 non-life basic insurers to reinsure by SBC led to inefficiencies in declare settlements.
The proposed modification to the Insurance coverage Company Act 2019 goals to deal with these points.
Nonetheless, the suggestion has brought about concern amongst SBC employees.
Staff of the company have publicly protested towards the proposal, arguing that it threatens SBC’s existence and urging lawmakers to not implement adjustments earlier than a brand new authorities is elected.
Chatting with the Monetary Specific, IDRA representatives said that if enacted, the adjustments might enhance each declare settlement charges and the stream of international capital into Bangladesh.
Sector insiders additionally identified that SBC’s lack of an internationally recognised credit standing has hindered entry to international funds for growth initiatives, the report added, citing sources.
Audited figures from the IDRA as much as December 2024 present that SBC owes greater than Tk14bn ($114.78m) to insurers who’ve but to obtain funds.
Conversely, insurers reportedly owe Tk9.28bn to SBC in unpaid premiums.
SBC basic supervisor S M Shah Alom attributed delays in settling claims to lacking documentation in declare recordsdata and in addition famous that insurers owed cash to SBC.
The IDRA argues that ending obligatory reinsurance with SBC might additionally strengthen personal reinsurers and facilitate entry for international reinsurers into Bangladesh’s market.
