Bangladesh has agreed to abolish the requirement for non-life insurers to reinsure at least 50 percent of their business with the state-owned Sadharan Bima Corporation (SBC), under the newly signed US-Bangladesh agreement on reciprocal trade.
Simply put, reinsurance is “insurance for insurance companies.” It allows insurance companies to share risks so they can pay large claims, such as factory fires or cargo losses.
Under the current law, at least half of such reinsurance must go to SBC, while the rest is handled by local or foreign companies.
In November last year, the Financial Institutions Division (FID) proposed removing a clause in the Insurance Corporation Act 2019 that requires non-life insurers to hand over half their reinsurance business to the lone state-owned insurer and reinsurer SBC.
The step was taken in line with the demand from the US as part of the conditions to cut reciprocal tariffs on Bangladesh’s exports to the American market.
Washington initially threatened to slap a 37 percent tariff on products shipped to its market from Bangladesh. It later reduced the rate to 20 percent which came into effect from August.
In the deal signed on February 9, the rate was reduced to 19 percent from 20 percent.
At that time, FID officials were reluctant to disclose the reason behind the move, but a top official admitted this yesterday.
Private insurers earlier welcomed the move, with some saying they were frustrated by SBC’s backlog of unsettled reinsurance claims, some dating back to 2020, which has delayed compensation for clients.
Just a few days later, SBC sent a letter to FID, expressing concerns over the removal of the mandatory reinsurance clause.
The state agency reported Tk 297.6 crore in net income after tax in the financial year ending in December 2024, up 13 percent from Tk 262.5 crore a year ago.
However, its total comprehensive income stood at a negative for the year when it took into account the unrealised losses on shares of Tk 862 crore. Its earnings per share slipped 37 percent to Tk 33.07 in 2024 from Tk 52.51 a year ago, according to Sadharan Bima’s audited financial statements.
