Key Points:
- Malfunctioning insurance companies in Bangladesh may now face mergers or liquidation under new reforms introduced by the interim government, following the recent overhaul of the banking sector.
- The Insurance Development and Regulatory Authority (IDRA) has finalised the draft of the Insurer Resolution Ordinance 2025, which aims to bring sweeping changes to the sector.
- The law will empower the IDRA to intervene in distressed firms, protect policyholders’ interests, and improve the overall integrity of the insurance market.
News Article:
Bangladesh’s struggling insurance firms are now facing the prospect of mergers or liquidation under a new reform plan being rolled out by the interim government. This comes shortly after the government’s successful overhaul of the banking sector, which saw the merger of five struggling Islamic banks into a single larger entity.
Sources say that the Insurance Development and Regulatory Authority (IDRA) has completed the draft for the Insurer Resolution Ordinance 2025, setting the stage for sweeping reforms in the insurance industry. The ordinance, which has been developed in consultation with industry stakeholders, is intended to address long-standing issues in the sector, similar to the measures taken for banking-sector restructuring.
The ordinance has already been submitted to the Financial Institutions Division, which operates under the Ministry of Finance, for further action. According to an IDRA official, “We submitted the ordinance on November 5th after incorporating several corrections suggested by stakeholders.”
Once passed, the ordinance will grant the IDRA significant powers to intervene in failing insurance companies. This includes the authority to appoint administrators to take control of troubled firms, dissolve their boards of directors, and transfer viable portfolios to newly created “bridge entities” aimed at ensuring a smooth transition.
The primary objective of this reform under the post-uprising government is to “protect policyholders’ interests and restore confidence in the insurance sector,” a critical move given the sector’s long-standing issues with delayed claims and poor consumer trust.
The ordinance will also empower the IDRA to recover assets that have been misappropriated or misused through fraudulent or unauthorised means. To help implement the new measures, the IDRA plans to establish a dedicated resolution cell, tasked with overseeing distressed insurers and facilitating the resolution process.
A special fund, consisting of contributions from the government and international development partners—including 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 established to support this process.
Under the proposed framework, struggling insurers may face management restructuring, mergers, or even liquidation, aligning the sector with ongoing reforms in the banking industry. The ordinance will grant the IDRA broad authority to intervene in financially distressed insurance firms, transfer their assets and liabilities, or establish bridge insurers to ensure that policyholders’ interests are safeguarded.
Industry insiders suggest that this reform could mark a significant turning point for the insurance sector, which has been marred by several high-profile cases of life insurers failing to settle maturity claims, thereby eroding public trust.
While non-life insurers are generally considered to be financially stronger, both life and non-life insurance companies will fall under the scope of the ordinance. Bangladesh’s insurance penetration remains one of the lowest in South Asia, hindered by chronic delays in claim settlement, opaque industry practices, and weak corporate governance.
The lack of consumer confidence in the insurance sector has long been a barrier to growth. Non-performing claims and persistent allegations of irregularities have deterred many households from purchasing coverage, despite increasing risks related to health, accidents, and climate change.
One IDRA official familiar with the new reforms explained: “The authority will have the power to liquidate distressed companies and facilitate ownership changes, mergers, or other forms of restructuring.”
“In special cases, the government or development partners may step in with bridge financing to ensure a smooth transition and protect policyholders,” the official added.
At present, Bangladesh has 46 non-life and 36 life insurance companies operating under the IDRA’s supervision. The success of the proposed reforms will be crucial in reshaping the country’s insurance landscape and restoring faith in the industry.
With the financial sector undergoing sweeping changes, the government’s efforts to stabilise the insurance market are seen as essential to the broader aim of improving financial stability and ensuring consumer protection in the long term.