Bangladesh to amend insurance law under US condition, state-owned reinsurer fears sharp income decline

The government of Bangladesh has moved to repeal the reinsurance-related clause in the Insurance Corporation Act, following conditions included in a non-disclosure agreement with the United States. If implemented, the reform is expected to significantly reduce the revenue of the state-owned Sadharan Bima Corporation (SBC), causing growing concern within the institution.

Reinsurance allows an insurance company to transfer part of its risk to another reinsurer in exchange for premium payments, reducing its liability in case of large claims. At present, 45 private non-life insurance companies must reinsure 50 per cent of their risk with SBC. The remainder may be reinsured either domestically or abroad.

This mandatory arrangement generates substantial revenue for SBC, half of which is shared with the private insurers. Foreign-funded government projects must also be reinsured through SBC, which is another major source of income. The draft of the amended law proposes liberalising this requirement as well.

Insiders believe that once the sector is liberalised, Western reinsurers will enlarge their presence in the Bangladeshi market. SBC formally communicated its concerns to the Financial Institutions Division on 11 November, warning that foreign currency outflow and potential money laundering risks may rise if companies are allowed to reinsure freely abroad.

SBC Managing Director Md Harun-or-Rashid told Prothom Alo that amending the law would ultimately impose financial burdens on the government.

SBC Financial Snapshot

The Insurance Development and Regulatory Authority (IDRA) drafted the Insurance Corporation (Amendment) Ordinance, 2025, which is now at the final stage of review. Commerce Secretary Mahbubur Rahman stated that the amendment was already under consideration prior to the NDA and should not be interpreted solely as a US-imposed obligation.

The NDA, signed on 13 June, includes a clause requiring Bangladesh to abolish mandatory reinsurance with SBC.

SBC argues that as a fully state-owned entity, it already provides higher guarantees than international standards, making the proposed international rating requirement unnecessary. Officials warn that if only companies with over 50 per cent government ownership qualify as “state-owned”, many entities will no longer fall within SBC’s mandatory reinsurance purview.

Professor Md Main Uddin of Dhaka University said it would not be prudent to open the sector entirely, as customers generally trust state-owned entities more than private insurers. He emphasised that part of mandatory reinsurance must continue.

Khaborwala/ASN