Bangladesh has agreed to abolish the long-standing requirement that non-life insurance companies reinsure at least 50 per cent of their business with the state-owned Sadharan Bima Corporation (SBC). The decision forms part of the newly concluded US–Bangladesh agreement on reciprocal trade and marks a significant policy shift in the country’s insurance sector.
Reinsurance is often described as “insurance for insurers”. It enables insurance companies to spread risk by transferring portions of their liabilities to other insurers or reinsurers. This mechanism is crucial in covering large-scale claims arising from events such as industrial fires, maritime cargo losses or natural disasters. By sharing exposure, insurers are better equipped to maintain financial stability and honour policyholders’ claims.
Under the existing legal framework, particularly the Insurance Corporation Act 2019, non-life insurers are obliged to cede at least half of their reinsurance portfolio to SBC, the country’s sole state-owned insurer and reinsurer. The remainder may be placed with domestic or international reinsurers. However, in November last year, the Financial Institutions Division (FID) proposed removing the relevant clause, paving the way for greater flexibility in reinsurance placement.
The move was linked to negotiations with Washington over tariff measures affecting Bangladeshi exports. The United States had initially threatened to impose a 37 per cent tariff on Bangladeshi goods. That rate was subsequently reduced to 20 per cent, effective from August. Following the agreement signed on 9 February, the tariff was further lowered to 19 per cent. Although officials were initially reticent about the rationale behind the proposed legal amendment, a senior government official has now confirmed that the reform was part of the broader trade concessions sought by the United States.
Private insurers have largely welcomed the decision. Several industry representatives have expressed frustration over delays in the settlement of reinsurance claims by SBC, with some cases reportedly pending since 2020. Such backlogs, they argue, have slowed compensation payments to policyholders and constrained operational efficiency. Greater access to international reinsurance markets is expected to enhance competition, improve risk pricing and diversify exposure.
SBC, however, has voiced reservations. In a letter to the FID, the corporation warned that removing the mandatory cession requirement could affect its business volume and long-term financial sustainability.
A summary of SBC’s recent financial performance is presented below:
| Indicator | FY 2023 | FY 2024 | Change |
|---|---|---|---|
| Net income after tax | Tk 262.5 crore | Tk 297.6 crore | +13% |
| Earnings per share (EPS) | Tk 52.51 | Tk 33.07 | -37% |
| Unrealised loss on shares | — | Tk 862 crore | — |
| Total comprehensive income | Positive | Negative | Decline |
Although SBC recorded a 13 per cent increase in net profit after tax in the financial year ending December 2024, its overall comprehensive income turned negative due to an unrealised loss of Tk 862 crore on equity investments. Earnings per share declined sharply by 37 per cent year-on-year, reflecting pressures on its broader financial position.
Analysts suggest that liberalising the reinsurance market could strengthen Bangladesh’s insurance industry by aligning it more closely with global practices. Nevertheless, the government will need to balance market competition with the strategic role historically played by the state-owned reinsurer. The reform represents not merely a sectoral adjustment, but a notable development in the evolving economic relationship between Dhaka and Washington.