As part of the government’s reform agenda, the Insurance Development and Regulatory Authority (IDRA) has proposed a series of reforms within the insurance sector. This includes amending the Insurance Act of 2010 and introducing the Insurance Resolution Ordinance 2025. The draft of this ordinance, modelled after the Banking Resolution Ordinance, has already been finalised.
The ordinance aims to protect policyholders’ interests, restore public trust in the insurance sector, minimise losses for creditors, and recover assets from those responsible for the financial instability of the sector.
However, concerns have been raised about whether the ordinance has been properly evaluated for feasibility, risk, structural impact, and market analysis. Questions have been raised about the limited stakeholder consultation, with only 15 out of 84 insurance companies providing feedback, leading to doubts about its effectiveness in achieving comprehensive reforms within the sector. The ordinance includes 97 clauses, focusing on establishing a resolution fund for restructuring insurance companies, creating bridge insurers, appointing administrators, facilitating mergers, implementing temporary state ownership, and transferring insurers to third parties.
Limited Stakeholder Engagement and Widespread Concerns
The IDRA sought feedback from stakeholders in June 2025, allowing just 15 days for responses. In October, the IDRA circulated an amended draft, seeking further opinions. However, only 15 companies out of 82 provided feedback, with 10 in agreement with the draft ordinance and the remaining 5 expressing reservations.
Insurance Sector Struggling With Financial Crisis
Since taking office in 2024, IDRA Chairman Dr. Aslam Alam has revealed that 15 life insurance companies and 17 non-life insurance companies are facing severe financial difficulties. According to the latest quarterly report, insurance claims worth 36.28 billion BDT remain unpaid, with the highest outstanding claims owed by Far Eastern Islamic Life (27.43 billion BDT).
Challenges to the Feasibility of the Resolution Fund
The proposed resolution fund aims to strengthen the financial capacity of insurance companies, but there are doubts regarding its practicality. While the fund is proposed to be financed through government loans, international financial institution loans, investment returns, contributions from insurers, and other sources, there is no precedent for international institutions offering financial assistance or loans to weak insurance companies due to mismanagement or corruption.
Merging and Restructuring Concerns
The ordinance also proposes the merger of struggling companies. However, concerns have been raised about the feasibility of merging companies that are financially weak due to misappropriation of funds. Historically, mergers in Bangladesh’s insurance sector have occurred due to financial instability, which could exacerbate the challenges.
The fast-tracked approval of the Insurance Resolution Ordinance and its potential implementation raises concerns about its effectiveness and impact on the insurance sector. Stakeholders worry that provisions related to temporary state ownership, mergers, and the transfer of insurers to third parties could be misused, leading to further instability in the market.