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Published : 21 Dec 2025, 01:28 AM
The interim government has prepared a draft amendment to the Insurance Corporation Act that would allow insurance companies to reinsure their risks with foreign firms.
It would end the current requirement to place reinsurance exclusively with the state-owned Sadharan Bima Corporation.
The move has drawn objections from Sadharan Bima Corporation, which has written to the ministry opposing the proposal, citing concerns over foreign currency outflow and loss of domestic market control.
Under existing rules, insurance companies must reinsure their risks with the state-owned corporation to manage large liabilities and ensure immediate claim settlement capacity.
Sadharan Bima Corporation currently operates under the Insurance Corporation Act, 2019.
The amended draft removes the obligation to reinsure exclusively with the state-owned corporation.
As a result, insurance companies will be able to choose between Sadharan Bima Corporation or foreign reinsurers.
Foreign companies, however, must hold internationally recognised credit ratings.
At present, Sadharan Bima Corporation earns a large amount in annual premiums from insurance companies without additional operational effort.
It remains the country’s only reinsurance institution.
Objecting to the draft, Managing Director Harun Or Rashid told bdnews24.com that the change would open Bangladesh’s general insurance sector to foreign companies, leading to a significant outflow of foreign currency each year.
He added that insurance companies do not earn foreign currency, but premium payments would flow abroad if foreign reinsurers are used.
In 2024, Sadharan Bima Corporation earned more than Tk 11 billion from the reinsurance sector.
Harun said the entry of foreign companies would sharply reduce this income and could also cut the corporation’s annual post-tax net profit of around Tk 4 billion.
Speculation suggests the liberalisation is a byproduct of a non-disclosure agreement (NDA) signed with the United States in August last year, which saw import duties on Bangladeshi goods reduced to 20 percent.
Under the law, reinsurance is mandatory in general insurance to spread risk in claim settlements.
Bangladesh has 45 general insurance companies, each required to reinsure 50 percent of their insured amount with Sadharan Bima Corporation.
The remaining 50 percent can be placed either with the state-owned corporation or foreign companies.
Projects financed or guaranteed by the government, as well as domestically implemented projects funded by foreign sources, however, must currently reinsure 100 percent of their risk with Sadharan Bima Corporation.
Revenue earned from the mandatory 50 percent reinsurance is shared at the end of the year between Sadharan Bima Corporation and the 45 private insurance companies.
If the amendment is enacted, both public and private insurers will no longer be tied to any specific institution, allowing them to arrange cover with both domestic and foreign firms.
Dhaka University Banking and Insurance Department Chairman Shahidul Islam Zahid said, “We must also strengthen the capacity of domestic institutions. If local companies provide better service and pay claims on time, there is no reason to choose foreign firms at higher cost.”
“Even if foreign firms enter, the insurance sector must ensure equal treatment. No one should receive special privileges,” he added.
He warned that foreign participation would put pressure on the country’s foreign currency reserves.
“This sector does not earn foreign currency. That means an added burden,” he said.
Premium payments to foreign insurers would require insurance companies to source foreign currency through banks, which would need approval from Bangladesh Bank, potentially creating further complications.
MA Zaher, acting chief executive officer of Meghna Insurance, suggested that market forces should dictate the shift.
“Whether to reinsure with foreign firms should depend on the insurer and the client. Naturally, everyone will gravitate toward whoever offers the best service,” he said.
