Insurers balk at regulator's power to intervene in failing cos

Insurers seem inclined to buy time to study a draft law vesting sweeping new powers in the regulator to intervene in failing companies in a bid to restore confidence in an industry weakened by chronic delays in claim settlement.

The Bangladesh Insurance Association (BIA), the umbrella body for privately owned insurers, confirmed it had been granted an additional month to respond to the proposed Insurer Resolution Ordinance 2025 attuned to the interim government's broad-based reform recipe.

The law, modelled on the country's bank resolution framework, would enable the Insurance Development and Regulatory Authority (IDRA) to restructure or liquidate distressed firms, transfer their assets and liabilities, or create "bridge insurers" to protect the interests of policyholders.

"We have again sought one month, and the regulator has agreed," Sayeed Ahmed, BIA president, told the FE on Saturday. "It will take time for us to provide feedback."

The request for extra time reflects mounting pressure on insurers to adapt to a regulatory overhaul that is being finalised against the backdrop of rising policyholder frustration stemming from alleged malpractice, in cases, over time.

Life insurers, in particular, have been accused of failing to honour claims on maturity, fuelling mistrust among customers.

People familiar with IDRA's plans say the new framework would cover both life and non-life companies, though the latter are considered to be in comparatively better shape.

Once the new law enacted, the regulator would be able to appoint administrators in troubled firms, strip out their management, and transfer viable portfolios to newly created bridge entities.

The ordinance would also allow IDRA to liquidate personal assets of directors implicated in fraud - a move intended to signal zero tolerance for mismanagement and embezzlement.

Analysts say the proposed law marks the most significant attempt in decades to address deep-rooted weaknesses in the insurance sector.

Non-performing claims (NPCs) and allegations of irregularities have long undermined trust, leaving many households wary of taking out policies.

"The authority will have the power to liquidate a troubled company and facilitate ownership changes, mergers or other restructuring," says one official, adding that the government or development partners might provide bridge financing to support the transition.

The BIA is scheduled to review the draft ordinance at an executive committee meeting to be held today (Sunday), underscoring the urgency of an issue that could redefine the structure and credibility of Bangladesh's insurance industry.

jasimharoon@yahoo.com