Concerns have emerged that the General Insurance Corporation’s revenue and business may decline after the government initiated steps to repeal the reinsurance provision under the Insurance Corporation Act, in accordance with a non-disclosure agreement (NDA) with the United States. Removal of this provision could reduce the organisation’s income and increase the government’s responsibility to provide pensions and subsidies.
Reinsurance allows an insurance company to transfer part of its risk to another firm in exchange for premiums to limit liability. Presently, 45 private non-life insurance companies are required to place 50 percent of their reinsurance with the state-owned corporation, while the remaining 50 percent can be handled domestically or abroad.
Under existing regulations, the corporation earns from mandatory reinsurance and shares half with private companies. Repealing this provision would reduce income. Mandatory reinsurance for government assets and foreign-funded projects is another significant source of revenue. The draft legislation proposes opening this to other companies.
The corporation reported earning 112.2 billion taka in premiums in 2024, with an average pre-tax profit of 40 billion taka over the past five years. The draft requires foreign-funded government projects to be insured by firms with international standards. Officials warn that implementation would result in premiums leaving the country.
Dhaka University Professor Md. Main Uddin noted that public confidence is higher in state-owned organisations, and the ability of private companies to settle claims is uncertain. Therefore, the draft should not be passed in its entirety, and a portion of reinsurance should remain mandatory.
AJ