The interim government of Bangladesh has embarked on an ambitious programme of reforms aimed at reviving the nation’s beleaguered insurance sector. Long-standing governance deficiencies, regulatory gaps and declining public confidence have driven insurance penetration to historically low levels, prompting urgent action.
Dr M Aslam Alam, Chairman of the Insurance Development and Regulatory Authority (IDRA), told The Financial Express that the reforms are designed to stabilise financially troubled insurers, protect policyholders, and restore trust in a sector crucial to the country’s economic resilience.
“Reform lies at the very heart of the interim government’s mandate,” Dr Alam said. “Over the past year, IDRA has worked intensively to implement legal, institutional, and technological changes across the insurance landscape.”
The reform agenda includes amendments to three existing laws—the Insurance Act 2010, the IDRA Act, and the Insurance Corporations Act 2019—and proposals for three new legislations: the Insurers Resolution Act, the Actuaries Act, and the Chartered Insurance Institute Act. Stakeholder consultations on these drafts have been completed, and they are now under ministerial review.
Currently, five to six insurance companies lack the financial capacity to settle claims, affecting an estimated 1.5 to 1.6 million policyholders and causing insurance penetration to fall to 0.30%, compared with 0.90% in 2010. To address this, IDRA proposes a resolution framework akin to the banking sector’s, enabling mergers, acquisitions, restructurings, or managed resolutions of distressed insurers.
A key challenge in the non-life segment is the persistent deadlock between insurers and the state-owned reinsurer, Sadharan Bima Corporation (SBC). IDRA has proposed making the mandatory 50% reinsurance cession to SBC optional, allowing capable insurers to reinsure abroad while ensuring policyholders’ claims are settled promptly.
The authority is also targeting systemic inefficiencies, including excessive commission structures of 40–70%, delayed reinsurance recoveries, and governance gaps. Proposed legal amendments would empower IDRA to appoint and remove senior management, regulate subsidiaries, conduct audits, and implement special investigative powers to curb fraud.
Digital modernisation forms another pillar of the reforms, with plans for mandatory integration of insurers’ databases with IDRA and the introduction of a National Core Insurance Solution. Regulatory fees are being revised to strengthen IDRA’s capacity, increasing annual income modestly from Tk 120 million to approximately Tk 250 million.
Dr Alam concluded, “Our ultimate objective is to protect policyholders, rebuild trust, and raise insurance penetration through governance-driven, structural reforms.”
Key Proposed Reforms in Bangladesh’s Insurance Sector
| Reform Area | Measures Proposed | Expected Outcome |
|---|---|---|
| Legal | Amend Insurance Act, IDRA Act; introduce Insurers Resolution Act | Stronger regulatory authority, ability to resolve failing insurers |
| Governance | Empower IDRA to appoint/remove executives, regulate subsidiaries, conduct audits | Improved corporate governance, reduced malpractice |
| Reinsurance | Make 50% SBC cession optional | Resolve deadlock, expedite claim settlements |
| Commissions | Eliminate abnormal commissions in non-life sector | Reduce corruption, improve solvency |
| Institutional | Establish Actuarial Institute, Chartered Insurance Institute | Address manpower and technical gaps |
| Digital | Integrate insurer databases, National Core Insurance Solution | Improve efficiency, transparency |
| Regulatory Fees | Revise registration and inspection fees | Strengthen IDRA capacity for oversight |