The General Insurance Corporation (SBC) has introduced a new requirement for private non-life insurance companies seeking to renew their reinsurance agreements, mandating the settlement of 30% of outstanding reinsurance premiums before renewal can proceed. This move has sparked discussion among insurers amid ongoing economic challenges.
Legal Framework for Reinsurance
Under the existing insurance law, non-life insurance companies in Bangladesh are required to maintain reinsurance arrangements to mitigate risk. Additionally, the Insurance Corporation Act stipulates that 50% of reinsurance-eligible premiums must be ceded to the General Insurance Corporation as a legal obligation. Consequently, private insurers enter into reinsurance contracts with SBC annually.
This year, SBC has made the clearance of 30% of previously outstanding reinsurance premiums a condition for renewing contracts. Private insurers who meet this payment requirement will be able to finalise their agreements; those who do not will be unable to renew.
Moreover, SBC has mandated that marine cargo policies be submitted monthly in the Bordo system, adding another layer of compliance for insurers.
Challenges Faced by Private Insurers
The Bangladesh Insurance Association (BIA), representing private insurance company owners, has raised concerns over the new requirement. According to the association, prevailing economic difficulties—such as the ongoing dollar shortage, global conflicts, and liquidity constraints—have made immediate payment of outstanding reinsurance premiums challenging for many companies.
BIA has urged SBC to allow the completion of reinsurance contracts for companies with unpaid premiums without requiring immediate payment. The association has also requested a one-month extension for the reinsurance renewal deadline and called for discussions to find an equitable solution.
Summary of SBC Requirements
| Requirement | Details |
|---|---|
| Outstanding Premium Payment | 30% of previous reinsurance premiums must be cleared for contract renewal |
| Marine Cargo Submission | Monthly submission via Bordo system |
| Legal Reinsurance Obligation | 50% of reinsurance-eligible premiums to SBC under Insurance Corporation Act |
Upcoming Technical Committee Meeting
To address the ongoing reinsurance renewal crisis, BIA has convened a meeting of the Non-Life Technical Sub-Committee. Scheduled for Monday, 6 April, at 11:00 AM in the BIA conference room, the meeting will be attended by BIA President Saeed Ahmed. The session aims to coordinate a unified position among private insurers ahead of discussions with SBC, ensuring a collective and strategic approach to negotiations.
This development underscores the delicate balance between regulatory compliance and operational feasibility, as insurers navigate both domestic challenges and global economic pressures while maintaining critical reinsurance arrangements.