Written by The Banking Post
A mounting pile of unpaid reinsurance claims at Sadharan Bima Corporation (SBC) has emerged as a major drag on Bangladesh’s insurance sector, sharply depressing claim settlement ratios and eroding policyholder trust, industry insiders say.
As of December 2024, SBC owes insurers more than Tk 14 billion in reinsurance claims, according to the Insurance Development and Regulatory Authority (IDRA). Because these dues remain unsettled, insurers have been unable to pay many of their clients on time.
IDRA data shows that non-life insurers paid Tk 12.37 billion in claims against a total of Tk 38.72 billion last year—yielding a settlement ratio of just 32 per cent.
“Claim settlement is the foundation of trust… but the system has remained fragile here,” said the CEO of Pragati Insurance, noting that private companies have struggled for years with SBC’s backlog. In some cases, it has taken up to a decade for insurers to recover reinsurance funds, forcing them to pay many claims out of their own pockets.
Reinsurance—essentially insurance for insurers—allows companies to share risks so they can cover large losses such as factory fires or cargo damage. By law, insurers must reinsure 50 per cent of their risk with SBC, while the rest can be placed locally or abroad. But insurers say the mandatory share ties them to an inefficient organisation.
Industry officials report frequent delays at SBC, including repeated requests for irrelevant documents and a “regulator-like” attitude rather than a partnership approach. An SBC official, however, argued that insurers often delay required paperwork.
The compulsory reinsurance rule has also become a hurdle for foreign-funded development projects, as SBC lacks an internationally recognised credit rating—a standard requirement for many donors. This has made it difficult for insurers to arrange international reinsurance.
Regulatory push for reform
After the political transition last August, IDRA launched a probe into the low settlement ratios and identified SBC’s inefficiency as a key factor. The inquiry found reinsurance claims pending for more than five years. While global reinsurers typically demand four core documents, SBC requires 19—causing significant processing delays.
In response, the Financial Institutions Division has recommended amending the Insurance Corporation Act 2019, including removing SBC’s exclusive right to compulsory reinsurance. Industry insiders say such reforms would boost competition and improve service for policyholders.
As Bangladesh seeks to attract more investment, insurers argue that global investors expect protection that meets international standards—ideally from a strong domestic reinsurer. Regional peers such as India, Vietnam, Nepal, Malaysia, the Philippines, and Ethiopia already have reinsurers with AM Best ratings. India’s GIC Re, for instance, carries an A- (Excellent) rating and operates globally.
By contrast, SBC has no recognised international rating. “No one knows its ability to meet ongoing or long-term obligations,” a senior insurance executive said, emphasising the importance of securing a rating and upgrading SBC’s operations to global benchmarks.
Industry experts warn that unless Bangladesh’s reinsurance market becomes more competitive and transparent, investor confidence will continue to weaken—and the burden of delayed claims will keep falling on insurers and policyholders.
