Malfunctioning insurance firms in Bangladesh may soon face mergers or liquidation as part of a major reform initiative spearheaded by the interim government, following the banking-sector overhaul.
Sources confirm that the insurance regulator has finalised the Insurer Resolution Ordinance 2025, setting the stage for sweeping changes within the insurance industry, akin to the restructuring efforts underway in the banking sector. The overhaul will include the mergers of five struggling Islamic banks into a larger, more viable entity.
The Insurance Development and Regulatory Authority (IDRA), which supervises 82 life and non-life insurance companies, has completed the draft legislation following extensive consultations with industry stakeholders. The ordinance has been submitted to the Financial Institutions Division under the Ministry of Finance for the next steps.
An IDRA official stated: “We submitted the ordinance on November 5th after incorporating several amendments suggested by stakeholders.”
Once enacted, the law will empower the IDRA to appoint administrators to troubled insurers, dissolve their boards, and transfer viable portfolios to newly established bridge entities. The main objective of the reform is to “protect policyholders’ interests and restore confidence in the insurance sector,” according to officials involved in the process.
The ordinance will also grant the regulator the authority to recover assets misappropriated through fraudulent or unauthorised means.
To implement the law effectively, the IDRA plans to set up a dedicated resolution cell.
A special fund, contributed by both the government and international development partners—including the World Bank’s International Development Association (IDA), the Asian Development Bank (ADB), the International Bank for Reconstruction and Development (IBRD), and the Islamic Development Bank (IsDB)—will be created to support the resolution process.
Under the proposed framework, insurers could face restructuring, mergers, or even liquidation, as part of a broader strategy to align the insurance sector with ongoing banking-sector reforms.
Modelled on the banking-sector resolution mechanism introduced by the interim government, the new ordinance will give the IDRA wide-ranging powers to intervene in financially distressed firms. These powers include transferring assets and liabilities or establishing bridge insurers to safeguard policyholders.
Industry insiders suggest that this initiative could signal a turning point for the insurance sector, where several life insurers have been accused of failing to settle maturity claims, leading to a significant erosion of public trust.
While non-life insurers are generally considered financially stronger, both life and non-life insurers will fall under the new ordinance.
Bangladesh’s insurance penetration remains among the lowest in South Asia, hindered by chronic delays in claim settlements, opaque business practices, and poor corporate governance. Non-performing claims and allegations of irregularities have long dissuaded households from purchasing insurance, despite growing risks from health issues, accidents, and climate change.
An industry insider commented: “The authority will have the power to liquidate distressed companies and facilitate ownership changes, mergers, or other restructuring.”
“In exceptional cases, the government or development partners may step in with bridge financing to ensure a smooth transition and protect policyholders,” the source added.
Currently, Bangladesh has 46 non-life and 36 life insurance companies operating under the supervision of the IDRA.