US Conditions Could Reduce State Insurance Corporation’s Reinsurance Income

Under a non-disclosure agreement (NDA) with the United States, the government has initiated steps to repeal the reinsurance provision from the Insurance Corporation Act. If this provision is removed, the state-owned General Insurance Corporation’s business and income are expected to decline, causing concern within the organisation.

Reinsurance is a process where an insurance company transfers part of its risk to another company or reinsurance firm in exchange for premiums to reduce its liability. Currently, 45 private non-life insurance companies are required to place 50 percent of their reinsurance with the General Insurance Corporation, while the remaining 50 percent can be handled domestically or abroad.

Under current rules, the corporation earns from mandatory reinsurance and shares half with private companies. This benefits both the state and private insurers. Removing the provision will reduce the corporation’s revenue.

Additionally, mandatory reinsurance for government assets or projects funded by foreign loans contributes to the corporation’s income. The new draft legislation proposes opening this to private and foreign companies. The General Insurance Corporation reported earning 112.2 billion taka in reinsurance premiums in 2024, with an average pre-tax profit of 40 billion taka over the past five years.

The draft, prepared by the Insurance Development and Regulatory Authority (IDRA), stipulates that projects with foreign funding must use companies with international standards. Officials warn that if implemented, premiums for foreign-funded projects will leave the country.

Dhaka University Professor Md. Main Uddin noted that customer confidence is higher in state-owned organisations, and many private companies may not have the capacity to settle claims. Therefore, the draft should not be passed in its entirety, and a portion of reinsurance should remain mandatory.

KhaborwalaAJ