Malfunctioning insurance companies in Bangladesh may face mergers or liquidation under a new reform ordinance, following the government’s overhaul of the banking sector.
The interim government has moved to tackle the ailing insurance sector, with sources revealing that the Insurer Resolution Ordinance 2025 has been finalised by the insurance regulator, paving the way for sweeping reforms. These reforms aim to address the systemic issues in the insurance industry in a manner similar to the ongoing restructuring of the country’s banking sector, which has seen the merger of five struggling Islamic banks into a larger entity.
The Insurance Development and Regulatory Authority (IDRA), which supervises 82 life and non-life insurance companies, has completed the draft law after extensive consultations with industry stakeholders. The ordinance has now been submitted to the Financial Institutions Division of the Ministry of Finance for necessary action.
An IDRA official confirmed that the ordinance was submitted on November 5, after incorporating several corrections suggested by stakeholders.
Once enacted, the law will grant the IDRA significant powers, including the ability to appoint administrators to oversee troubled insurers, dissolve their boards, and transfer viable portfolios to newly established bridge entities. The primary goal of this reform under the post-uprising regime is to “protect policyholders’ interests and restore confidence in the insurance sector.”
Additionally, the ordinance authorises the IDRA to recover assets misappropriated through illegal means, enhancing oversight and accountability in the sector. To enforce the new law effectively, the IDRA plans to establish a dedicated resolution cell to manage distressed insurers.
A special fund—comprising contributions from both the government and development partners, such as 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. This fund will play a crucial role in assisting struggling insurers during their restructuring or liquidation processes.
Under the proposed framework, insurers could face management restructuring, mergers, or liquidation, depending on their financial situation. This is part of an ambitious strategy to align the insurance sector with the ongoing reforms in the banking industry.
Modeled on Bangladesh’s bank-resolution mechanism, introduced by the interim government, the ordinance would grant the IDRA broad authority to intervene in financially distressed firms. The regulator would be empowered to transfer assets and liabilities or establish bridge insurers to safeguard policyholders’ interests.
Industry insiders have suggested that this move could mark a turning point for a sector long plagued by poor practices. Several life insurers have faced criticism for failing to settle maturity claims, leading to an erosion of public trust in the industry. While non-life insurers are generally considered more financially stable, both segments will be covered under the new ordinance.
Insurance penetration in Bangladesh remains one of the lowest in South Asia, hindered by chronic delays in claim settlements, opaque business practices, and weak corporate governance. Non-performing claims, along with recurring allegations of irregularities, have long discouraged households from purchasing insurance, despite growing risks from health issues, accidents, and climate change.
“The authority will have the power to liquidate distressed companies and facilitate ownership changes, mergers, or other restructuring measures,” said an official familiar with the developments. “In special cases, the government or development partners may step in with bridge financing to ensure a smooth transition and protect policyholders.”
Currently, Bangladesh has 46 non-life and 36 life insurance companies operating under the supervision of IDRA. The new ordinance is expected to help create a more transparent, efficient, and trustworthy insurance sector in the country.