Bangladesh Advances Sweeping Insurance Sector Reforms

The interim government of Bangladesh has announced a comprehensive reform programme designed to revitalise the nation’s struggling insurance sector. Years of weak governance, regulatory gaps, and declining public confidence have hindered growth, resulting in historically low insurance uptake. Authorities stress that immediate, well-structured reforms are crucial to restoring financial stability, reinforcing corporate governance, and rebuilding trust among policyholders.

Dr. M. Aslam Alam, Chairman of the Insurance Development and Regulatory Authority (IDRA), told Financial Express, “The primary objective of our reform agenda is to stabilise financially vulnerable insurance companies, safeguard policyholders’ interests, and rebuild public confidence in the sector.” Over the past year, IDRA has undertaken a series of legal, institutional, and technological measures aimed at tackling persistent challenges and aligning the sector with international best practices.

The reform package involves amendments to three existing laws—the Insurance Act 2010, the IDRA Act, and the Insurance Corporation Act 2019—alongside proposals for three new legislations: the Insurance Resolution Act, the Actuarial Act, and the Chartered Insurance Institute Act. After extensive consultations with industry stakeholders, the draft bills are currently under cabinet review.

Currently, five to six insurance companies are reportedly unable to meet their claim obligations, affecting roughly 1.5–1.6 million policyholders. Insurance penetration has sharply declined from 0.90% in 2010 to just 0.30% today. To stabilise these companies, IDRA has proposed a resolution framework modelled on banking-sector mechanisms, permitting mergers, restructuring, or managed resolution processes to protect policyholders and prevent systemic risk.

Non-life insurers, long entangled in disputes with the state-run General Insurance Corporation (GIC), are expected to benefit from reforms that make the 50% GIC reinsurance requirement optional. This change aims to enable competent insurers to settle claims more efficiently through international reinsurance arrangements.

Digitalisation forms a cornerstone of the reforms. Company databases will integrate with IDRA systems, and a “National Core Insurance Solution” will be introduced to enhance operational transparency and reporting efficiency. Regulatory fee revisions are also planned, potentially raising IDRA’s annual revenue from BDT 1.2 crore to approximately BDT 2.5 crore, thereby strengthening the authority’s oversight capacity.

Dr. Alam emphasised, “Our ultimate goal is to protect policyholders, restore trust, and stimulate insurance adoption through structural, governance, and technological reforms.”

Proposed Insurance Sector Reforms in Bangladesh

If implemented fully, these reforms are expected to bolster long-term sector stability, enhance economic resilience, and significantly rebuild public trust in Bangladesh’s insurance industry.