Global Insurance failed to reinsure policies worth Tk 555cr, audit finds

Abdur Rahman Abir: Global Insurance PLC failed to reinsure policies worth about Tk 555 crore, despite legal requirements mandating reinsurance for eligible policies, according to a special audit conducted by Bangladesh’s insurance regulator.

The findings raise concerns about financial risks for both the insurer and its policyholders, while also depriving the state-owned reinsurer, Sadharan Bima Corporation (SBC), of potential reinsurance premiums.

The Insurance Development and Regulatory Authority (IDRA) conducted a special audit on Global Insurance’s 2022 operations. The audit was carried out by UHY Syful Shamsul Alam & Co., a chartered accounting firm.

According to the audit report, the audit team reviewed 3,022 insurance policies issued by seven branch offices of Global Insurance in 2022.

Of these, 1,249 policies were eligible for reinsurance under regulatory rules. However, the company failed to reinsure 1,012 of those policies, representing about 81% of the reinsurance-eligible policies.

The report said the total insured amount of the policies that were not reinsured stood at Tk 2,598.12 crore, of which Tk 555.19 crore was required to be reinsured.

In the annex of the audit report, auditors provided detailed information on 83 policies out of the 1,012 policies that were eligible but not reinsured.

Among them, seven fire insurance policies had a total insured amount of Tk 21.86 crore, of which Tk 7.86 crore was eligible for reinsurance.

In addition, one motor insurance policy had an insured value of Tk 77 lakh, including Tk 32 lakh that required reinsurance coverage.

The report also listed 75 marine cargo insurance policies, which generated gross premiums of Tk 50.49 crore, while the reinsurance-eligible insured amount stood at Tk 27.99 crore.

Failing to reinsure eligible policies constitutes a direct violation of the Insurance Corporation Act, which requires insurers to reinsure eligible risks.

Such failures can create significant financial exposure. Without reinsurance protection, an insurance company may face difficulty paying claims in the event of large losses, potentially threatening its financial stability.

Under Section 10(1)(Jha) of the Insurance Act 2010, the regulator has the authority to suspend or cancel the registration of an insurance company if it fails to maintain satisfactory reinsurance arrangements.

According to available information, IDRA held a hearing on July 23, 2025, to examine 32 audit objections against Global Insurance, including the failure to reinsure eligible policies.

Despite the allegations of violations of the Insurance Act and IDRA circulars, the hearing did not result in any immediate fines or punitive actions against the company.

Instead, the hearing recommended that the regulator’s legal division review the matter and take appropriate action while issuing a warning to the insurer.

However, it remains unclear whether the legal division has since taken any disciplinary measures against Global Insurance.

Industry records show that IDRA previously suspended the license of Standard Insurance Limited in 2015 over similar violations.

The company had failed to carry out mandatory reinsurance against policies worth Tk 46.33 crore. IDRA initially suspended its license for three months starting June 21, 2015, later extending the suspension by another two months.

However, on June 29 of the same year, the High Court stayed the suspension for six months, allowing the company to continue operations during that period.

Insurance sector experts say failing to reinsure eligible policies can significantly weaken an insurer’s ability to handle large claims.

In the event of a major accident or catastrophe, the absence of reinsurance protection may leave insurers unable to meet their financial obligations to policyholders.

They warn that such practices increase the risk of insolvency for insurers and undermine customer protection, which is why the law mandates reinsurance for eligible policies.

Attempts were made to contact Global Insurance PLC for comment.

Initially, the company did not provide any response. Although it later indicated that it would share its position, no official statement had been received at the time of publication.