Problematic insurance companies in Bangladesh may soon face sweeping management changes—or even liquidation—as part of a major overhaul of the sector, in line with broader reforms currently underway in the banking industry.
The Insurance Development and Regulatory Authority (IDRA) is finalising a powerful new legal framework titled the Insurer Resolution Ordinance 2025, which is expected to give the regulator far-reaching authority to intervene in financially distressed insurers. The draft ordinance is set to be finalised at a crucial meeting scheduled for Tuesday, where key stakeholders from both life and non-life insurance companies have been invited to provide their feedback. The meeting will be presided over by IDRA Chairman Dr Aslam Alam.
According to a letter obtained by The Financial Express, stakeholders have been directed to submit written observations and proposals based on the draft, which was earlier made available on the IDRA website for public review. However, officials have confirmed that the Bangladesh Insurance Association (BIA), the apex body representing insurers, has yet to submit any formal feedback, despite repeated calls for engagement.
The lack of response from BIA has raised concerns at a time when the regulator is seeking to enforce a landmark legal instrument to restore public confidence in an industry that has long been criticised for delayed claim settlements, poor governance, and high management costs.
Modelled on the country’s bank resolution law, the proposed insurance ordinance would grant IDRA the authority to restructure troubled firms, appoint administrators, remove existing boards, merge companies, transfer assets and liabilities, or even liquidate failing insurers. In special cases, the creation of “bridge insurers” may be used to protect policyholders’ interests, ensuring continuity of service during a transition period.
The law also contains strict punitive measures, including the power to seize personal assets of directors found guilty of fraud or embezzlement—an unprecedented move designed to demonstrate zero tolerance for financial malpractice.
Officials close to the matter describe the proposed ordinance as the most ambitious insurance sector reform in decades. They note that the country’s insurance penetration remains among the lowest in South Asia, primarily due to a lack of public trust, poor corporate practices, and widespread delays in claims processing.
Several life insurance companies have been accused of failing to pay out maturity claims, which has eroded policyholder confidence, while the non-life segment, though in relatively better shape, also falls under the ordinance’s scope. Non-performing claims and recurring irregularities have further discouraged households from purchasing coverage, even as financial risks from health emergencies, accidents, and climate-related disasters continue to rise.
A senior IDRA official, speaking on condition of anonymity, stated that once the draft is finalised in Tuesday’s meeting, it will be submitted to the Ministry of Finance for vetting and eventual enactment. The official added that the law will empower IDRA to take over failing companies, facilitate ownership changes, and, where necessary, work with the government or development partners to secure bridge financing. Ultimately, the ordinance aims not only to hold bad actors accountable but also to prepare the insurance sector for long-term growth and rebuild the public’s trust in an essential but faltering industry.
