IMF-Driven Reforms Pressure Insurance Sector

Bangladesh’s insurance sector is undergoing increasing scrutiny and reform pressure under the International Monetary Fund (IMF)-supported financial programme. Alongside the banking sector, insurers are being urged to improve governance, transparency, customer service, claims settlement efficiency, and investment practices as part of broader structural reforms.

The reform agenda forms part of the IMF’s Extended Credit Facility (ECF), Extended Fund Facility (EFF), and Resilience and Sustainability Facility (RSF) programmes. According to IMF reports, a mission visited Bangladesh from 29 October to 13 November 2025 to discuss the fifth review under these arrangements and the 2025 Article IV Consultation. Earlier, in June 2025, the IMF indicated that total support under the ECF and EFF programmes had been raised to approximately $4.1 billion, with an additional $1.4 billion under the RSF.

Structural weaknesses in the insurance sector

Bangladesh’s insurance penetration remains very low, estimated at only 0.33%–0.4% of GDP. In the 2024–25 fiscal year, total insurance premiums stood at Tk 18,534 crore, of which life insurance accounted for Tk 12,042 crore and general insurance Tk 6,492 crore. The life fund reached approximately Tk 34,650 crore.

A key concern is the sector’s weak claims settlement performance. In 2024, insurers settled 57% of total claims, paying Tk 9,476 crore against claims worth Tk 16,484 crore. Life insurance claim settlement fell from 72% to 65%, while general insurance declined more sharply from 41% to 32%.

Comparative insurance penetration

Globally, claim settlement ratios typically range between 97% and 98%, highlighting a significant gap in Bangladesh’s performance.

Declining trust and policy lapses

Rising inflation and weak confidence in insurers have contributed to an estimated 4% increase in policy lapse rates in late 2025. This indicates growing difficulty among policyholders in maintaining premium payments or continuing trust in insurance providers, posing risks to long-term fund stability and investment capacity in the life insurance segment.

Despite a government-led Tk 925 crore “Bangladesh Insurance Sector Development Project” launched in 2018, outcomes have fallen short. The number of policyholders declined from around 13.6 million to 8.22 million by 2024, while insurance penetration dropped from 0.55% to 0.36% during the project period.

Reform priorities under discussion

Policy discussions with the IMF and stakeholders have identified several reform areas:

• Legal and regulatory strengthening: Amendments to the Insurance Act 2010 and IDRA Act 2010 to enhance the powers of the Insurance Development and Regulatory Authority (IDRA), including restructuring weak companies and improving supervisory control.
• Capital adequacy and solvency: Ensuring insurers maintain sufficient capital to meet claims obligations, addressing weak financial structures and actuarial capacity gaps.
• Investment reform: Revising mandatory investment rules requiring life insurers to allocate at least 30% of funds to government securities, moving towards a more diversified, risk-based framework.
• Claims digitisation: Introducing mandatory timelines, central databases, and digital claims systems to improve transparency and accountability.
• Product diversification: Expanding agricultural index insurance, health insurance, and climate-related coverage to increase penetration and financial protection.

Macroeconomic context

The IMF’s January 2026 assessment indicates Bangladesh’s GDP growth slowed to 3.7% in FY2025, down from 4.2% in FY2024 and 5.8% in FY2023. Growth is projected to recover to around 4.7% in FY2026 and FY2027 if financial sector reforms and revenue measures are effectively implemented.

Overall, while Bangladesh’s insurance sector remains structurally underdeveloped compared to global benchmarks, ongoing IMF-supported reforms aim to improve stability, efficiency, and public confidence over the medium term.