The Government of Bangladesh has initiated steps to repeal the mandatory reinsurance clause from the Insurance Corporation Act, following conditions included in a non-disclosure agreement with the United States. If repealed, this may significantly reduce the revenue of the state-owned Sadharan Bima Corporation (SBC), creating concern among officials of the institution.
Reinsurance is a risk-sharing mechanism through which an insurance company transfers part of its risk to another entity in exchange for a premium. Currently, 45 private non-life insurance companies are required to reinsure 50 per cent of their total risk with SBC, while the remaining portion may be placed with either local or foreign reinsurers.
SBC generates large revenue through this mandatory provision, which is shared with private companies. Moreover, reinsurance of government properties and foreign-funded projects is also compulsory through SBC. The draft of the amended law proposes to relax or abolish this requirement, opening the door for foreign reinsurers to expand their business.
SBC warned in a letter sent to the Financial Institutions Division that the abolition of the mandatory clause may cause excessive foreign currency outflow and increase money laundering risks through reinsurance payments abroad.
SBC Managing Director Md Harun-or-Rashid said the amendment would ultimately impose financial burdens on the government, as SBC’s income would drop and subsidies might become necessary.
SBC Reinsurance Income (2024)
| Institution | Premium Income | Average Pre-tax Profit |
|---|---|---|
| SBC | Tk 11.22 billion | Tk 4 billion |
The Insurance Development and Regulatory Authority (IDRA) has drafted the Insurance Corporation (Amendment) Ordinance, 2025, and the proposal is now nearing finalisation.
Commerce Secretary Mahbubur Rahman stated that although the NDA includes references to law reform, the initiative predates the agreement and should not be viewed solely as a US-imposed condition.
Professor Md Main Uddin of Dhaka University said full liberalisation would be unwise, as customer confidence in state-owned institutions remains significantly higher than in private companies. He emphasised maintaining some level of mandatory reinsurance.