B Mirror Report : In order to stabilize Bangladesh’s beleaguered insurance industry, the interim government has published a comprehensive reform program. This agenda aims to address governance shortcomings, lax regulation, and poor public confidence that have caused insurance penetration to drop to all-time lows.

The Insurance Development and Regulatory Authority’s (IDRA) chairman, Dr. M. Aslam Alam, told the media that the reforms are essential to the government’s mission and have been put into effect over the past year through institutional, legislative, and technological adjustments.

As part of the initiative, IDRA has proposed amendments to three existing laws—the Insurance Act 2010, the IDRA Act, and the Insurance Corporations Act 2019—and drafted three new laws: the Insurers Resolution Act, the Actuaries Act, and the Chartered Insurance Institute Act. “Stakeholder consultations on these drafts are complete, and the process is now with the ministry for further action,” Dr Alam said.

The overarching goal is to establish sound governance. “Without governance, there can be no trust. And without trust, insurance penetration cannot increase,” he noted. Currently, five to six defaulting insurance companies are unable to settle claims for around 1.5 to 1.6 million policyholders, contributing to a fall in insurance penetration to just 0.30 per cent, down from 0.90 per cent in 2010.

To address financially distressed insurers, IDRA has proposed an Insurers Resolution Law, modelled on the banking sector framework, allowing acquisition, merger, restructuring, or resolution of failing companies. Dr Alam emphasized that outright liquidation is often not feasible due to the volume of outstanding claims. A proposed Insurance Sector Crisis Management Council would oversee recovery from mismanagement.

One key challenge is the deadlock in reinsurance between insurers and Sadharan Bima Corporation (SBC), the state-owned reinsurer. IDRA proposes making the mandatory 50 per cent reinsurance cession to SBC optional, allowing capable insurers to seek foreign reinsurance. “Foreign reinsurance often results in net inflows as claims are settled promptly,” Dr Alam explained.

The reforms also target excessive commissions in the non-life sector, which currently range from 40 to 70 per cent. IDRA, following consultations with the Bangladesh Insurance Association, has moved to discontinue such commissions, citing corruption and malpractice.

Legal reforms will empower IDRA to remove CEOs and board members, regulate subsidiaries, strengthen audits, and conduct special investigations. Institutional reforms include an Actuaries Act to support IFRS 17 implementations, and a Chartered Insurance Institute law to address manpower shortages.

Digital initiatives include mandatory linkage of insurers’ databases with IDRA and the introduction of a National Core Insurance Solution. Regulatory fees are also being revised to bolster IDRA’s capacity. Under the new structure, registration fees will rise from Tk 1 to Tk 2.50, still the lowest in South Asia, while the regulator’s income will increase from Tk 120 million to around Tk 250 million annually.

Our ultimate goal is to protect policyholders, restore confidence, and increase insurance penetration through governance-driven reforms,Dr Alam said.