Final draft empowers regulator to declare bankruptcy

Final draft of Insurers Resolution Ordinance-2025 has been prepared, empowering the insurance regulator to declare a troubled company bankrupt and sell personal assets of directors, if needed, to settle claims.

The draft ordinance promises extensive power to the Insurance Development and Regulatory Authority (IDRA) to facilitate ownership changes, liquidation, or mergers of troubled companies.

The FE received a copy of the document.

The new law, if brought into effect, will allow the IDRA to limit family ownership concentration, and impose hefty fines in cases of serious misconduct to restore public trust and ensure good governance in the sector.

The law has been designed as part of reforms to enforce greater accountability in the sector at a time when several insurers are grappling with a liquidity crisis and are unable to pay off policyholders. Their financial health faltered due to massive irregularities during the previous government.

"The primary objective of the Insurance Resolution Ordinance-2025 would be to safeguard policyholders' interests, particularly by ensuring timely claim settlement," said Saifunnahar Sumi, spokesperson and media & communication consultant at the IDRA.

A good number of insurance companies, particularly life insurers, have failed to settle claims upon maturity due to corruption and irregularities.

The new law will create legal scope for the regulatory authority to address the issues that have been weakening the sector.

Ms Sumi said the insurance regulator had been conducting special audits of poorly-rated insurance firms facing complaints of non-settlement of claims.

"Based on the findings of these audits, the Ordinance, similar to the Bank Resolution Ordinance, necessary action will be taken, which would be beneficial for both weak insurers and policyholders."

The companies undergoing regulatory scrutiny are Sunlife Insurance, Homeland Life Insurance, Padma Islami Life Insurance, Progressive Life Insurance, Protective Islami Life Insurance, Best Life Insurance, Prime Islami Life Insurance, Jamuna Life Insurance, Diamond Life Insurance, Swadesh Life Insurance, Sunflower Life Insurance, Fareast Islami Life Insurance, Golden Life Insurance, BAIRA Life Insurance, and NRB Islamic Life Insurance.

Poor-performing general insurers will also be audited by the IDRA in phases.

The Insurers Resolution Ordinance will allow restructuring of the boards of insurance firms just as the Bank Resolution Ordinance allows changes in bank ownerships.

In addition, the regulator is also working to secure funds from the government so that it can fully or partially refund affected policyholders and arrange bank loans in favour of the troubled companies. Similar to the concept of bridge bank, a bridge insurance company will be formed, as per the 2025 ordinance, before the injection of capital to help companies recover from their sorry state.

During the process, the government will have the ownership of the troubled insurance companies.

According to IDRA, the audits were aimed at uncovering why insurers had failed to settle policyholders' claims and collect premiums, what the policy lapses were and the current status of the assets of the firms.

The regulator also wants to identify individuals responsible for mismanagement and take appropriate punitive actions.

According to IDRA, only 57 per cent of insurance claims were settled in 2024. Insurers paid out Tk 94.76 billion against total claims of Tk 164.84 billion.

The country has 82 insurance companies - 36 life insurers and 46 non-life insurers. IDRA data shows that more than 2.6 million policies have lapsed over the past 14 years.

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