Proposed amendment to insurance corporation act sparks protest from SBC employees

Staff Correspondent: The Insurance Development and Regulatory Authority (IDRA) have proposed sweeping amendments to the Insurance Corporation Act, 2019, drawing sharp resistance from employees of the state-owned Sadharan Bima Corporation (SBC). The amendments- targeting 17 provisions of the existing law- seek to lift the mandatory 50 percent reinsurance obligation for private non-life insurance companies with SBC and introduce key changes in the handling of government property insurance.

Under the existing framework, Section 17 of the Act needs every insurer operating in Bangladesh to reinsure half of its non-life reinsuranceable premium with SBC, while the rest may be placed locally or abroad. This provision has long ensured a stable revenue stream for the state-run corporation, maintaining its main role in the domestic insurance ecosystem. IDRA’s proposal to repeal this section would end that legal compulsion, permitting insurance companies to independently choose their reinsurance partners both at home and abroad.

The regulator argues that the move would foster competition, increase operational efficiency and align Bangladesh’s reinsurance practices with global standards. By liberalising reinsurance placement, private insurance companies could access global markets, negotiate better terms and improve portfolio diversification- potentially benefitting policyholders through lower cost and improved service.

However, critics, particularly SBC officials, warned the proposal would erode the corporation’s institutional strength and undermine its public mandate. They contend that removing the 50 percent reinsurance requirement risks destabilising the domestic reinsurance market and diminishing state control over strategic insurance assets.

Further controversy surrounds the proposed amendment to Section 16, which currently mandates SBC to insure all management properties and share 50 percent of the premium income with private non-life insurers. The new proposal maintains the profit-sharing arrangement but introduces a crucial change- necessitating private insurers to bear proportional responsibility for claim payment arising from the portion of premium they receive. It also seeks to redefine government property and empower the government to relax SBC’s exclusive underwriting requirement in specific cases, mainly for foreign-funded projects where global credit rating conditions apply.

In response, the SBC Employees Union has launched a movement opposing the amendments, demanding that the management suspend the reform process ahead of the national election. The union has raised seven specific demands, including halting what they describe as an attempt to weaken the state insurer under pressure from private interest.

Union leaders argue that the proposed changes could lead to job insecurity, revenue loss and a gradual erosion of public trust in the country’s only state-run non-life insurer. They insist that any reform must strengthen, not diminish, SBC’s capacity to serve national interest, particularly in underwriting government assets and managing large-scale risks.