IDRA flags 17 non-life insurers as risky; industry questions transparency

Abdur Rahman Abir: The Insurance Development and Regulatory Authority (IDRA) have labeled 17 non-life insurance companies in Bangladesh as ‘risky,’ sparking widespread concern in the sector. While the regulator insists the assessment was based on a comprehensive review of each company’s operations, it has refrained from disclosing the benchmarks used, raising questions regarding the credibility and transparency of the evaluation.

Industry experts have pointed out that risk determination for insurance companies, both globally and locally, generally hinges on credit ratings and solvency margins- two critical indicators of financial health and operational stability. In Bangladesh, however, the solvency margin regulation for non-life insurers was only introduced in October 2024 and is not set to take effect until the end of 2025. As a result, its use as a yardstick for assessing company risk appears premature. Similarly, credit rating reports for the listed companies do not align with the notion that they are financially unstable or at risk.

The announcement from IDRA, made during a press briefing by Chairman Dr. M Aslam Alam in 2 July, did not specify which companies were under scrutiny or on what grounds. Subsequent media reports, citing the chairman, revealed the names of the companies and linked their classification to claim-settlement ratios. However, experts argue that claim settlements in non-life insurance follow a legally defined process involving surveyor assessments, verification documents and reinsurance conditions. Fluctuations in claim ratios within a short period, they note, do not essentially signal a company’s instability.

A review by Insurance News BD of the financial statements of the companies listed as risky found no major red flags. Several of them, including Nitol Insurance, Provati Insurance, Dhaka Insurance, Islami Insurance Bangladesh, Purabi General Insurance and Phoenix Insurance, reported strong asset bases and high credit ratings ranging from “AA” to “AAA.” The findings suggest that IDRA’s classification may not align with standard risk evaluation practices.

Leaders of the affected companies have voiced deep concern over the regulator’s move. Nitol Insurance CEO S M Mahbubul Karim questioned how a company maintaining a healthy claim-settlement ratio could be deemed risky, suggesting that the declaration may stem from a misinterpretation of data. Provati Insurance CEO Jahidul Islam Jahid said that the Bangladesh Insurance Association (BIA) has already engaged with IDRA, which seemingly expressed regret over the confusion. Dhaka Insurance CEO Bayezid Mujtaba Siddiqui added that his company’s solvency margin remains meaningfully above the essential benchmark, leaving ‘no logical basis’ for its inclusion on the list.

When approached for clarification, IDRA spokesperson Saifunnahar Sumi said that the regulator had assessed several operational factors before issuing the risk classification. However, she declined to specify what those factors were. She further added that IDRA has initiated audits for the 17 companies covering a five-year period from 2019 to 2023 as part of its routine monitoring activities- the first such audits since 2019.