The General Insurance Corporation (SBC) has imposed a new condition for private non-life insurers wishing to renew their reinsurance agreements, requiring the settlement of 30% of any outstanding reinsurance premiums before contracts can be finalised. This move comes amid economic and liquidity challenges affecting many insurers across the country.
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Legal Context of Reinsurance
Bangladesh’s insurance regulations mandate that all non-life insurance companies maintain reinsurance arrangements to safeguard against large claims. Under the Insurance Corporation Act, private insurers are legally obliged to cede 50% of reinsurance-eligible premiums to SBC. As a result, private companies routinely negotiate annual reinsurance agreements with the corporation.
This year, SBC has stipulated that renewal of these agreements will only proceed if insurers pay at least 30% of their previously unpaid reinsurance premiums. Those who fail to meet this requirement will not be able to renew their reinsurance contracts. In addition, SBC has required that marine cargo policies be submitted monthly via the Bordo system, ensuring continuous compliance and monitoring.
Concerns from Private Insurers
The Bangladesh Insurance Association (BIA), which represents private insurance company owners, has raised concerns over the new payment requirement. BIA notes that due to the ongoing dollar shortage, the global economic impact of the war, and domestic liquidity constraints, many companies are unable to pay outstanding premiums immediately.
BIA has formally requested that SBC allow the completion of reinsurance agreements without upfront payment of outstanding amounts for eligible companies. Additionally, BIA has sought a one-month extension for the reinsurance renewal deadline, while urging constructive discussions to find a balanced solution.
Key Requirements for Reinsurance Renewal
| Requirement | Description |
|---|---|
| Payment of Outstanding Premiums | Minimum 30% of previous unpaid reinsurance premiums must be paid before renewal |
| Marine Cargo Compliance | Monthly Bordo submission mandatory |
| Legal Obligation | 50% of reinsurance-eligible premiums must be ceded to SBC as per law |
Technical Sub-Committee Meeting
To address the emerging crisis, BIA has convened a meeting of the Non-Life Technical Sub-Committee. Scheduled for Monday, 6 April at 11:00 AM in the BIA conference room, the session will be attended by BIA President Saeed Ahmed. The meeting’s purpose is to ensure a unified stance among private insurers ahead of negotiations with SBC, allowing for a coordinated and strategic approach.
This situation highlights the ongoing tension between regulatory obligations and operational feasibility, as private insurers navigate both domestic and international financial pressures while seeking to maintain critical reinsurance coverage.