IDRA orders insurers to stop citing ‘popular rising’ to reject claim

Staff Correspondent: Bangladesh’s insurance regulator, the Insurance Development and Regulatory Authority (IDRA), has the state-owned reinsurer Sadharan Bima Corporation (SBC) to stop treating ‘popular rising’ (mass uprising) as a default reason for denying insurance and reinsurance claim, according to industry sources familiar with the communication.

In a letter sent to SBC on January 4, IDRA asked the corporation to withdraw an earlier policy position that damage caused by ‘popular rising’ is excluded from coverage under common fire and universal policy wordings. The regulator further instructed insurers to handle each claim individually by appointing licensed surveyors and taking decisions based on survey reports in line with insurance law and regulation.

According to the stakeholders, The SBC’s earlier position was shaped through consultation with private insurers and survey firms. At a meeting held on March 3 last year, attended by chief executives of private non-life insurers and representatives of loss assessment agencies, participants seemingly agreed that losses driven by ‘popular rising’ are typically not covered under standard policy conditions.

SBC later communicated the policy interpretation to all insurers in a letter dated March 23, arguing that if the proximate cause (nearest cause) of damage to insured property is ‘popular rising,’ the loss falls outside coverage. The guidance also noted that even when policies include riot and strike protection, those clauses do not necessarily extend to ‘popular rising.’ Its review also discussed the likely event window, suggesting the period should not be narrowly confined to August 4-8, 2024 and could extend to July 16-August 8 or later cases.

IDRA’s directive cites a stakeholder meeting at the regulator’s office on December 17, where concern was raised regarding rejecting the claim by explicitly citing ‘popular rising’ as the cause. The regulator’s instruction signals a move away from broad categorisation and toward evidence-led assessment- necessitating surveyor appointment for each claim and subsequent action based on professional loss reports.

Industry participants link the directive to provisions in Bangladesh’s insurance law governing claim settlement, which need non-life losses to be assessed and adjusted by licensed insurance surveyors and include penalties for breaches.

The order has intensified debate in the sector. Some stakeholders say that if policy exclusions clearly bar uprising-related losses, discouraging that classification could make disputes and uncertainty in reinsurance recoveries. Others warn the opposite: removing ‘popular rising’ from consideration may encourage misrepresentation, enabling fraudulent claims through false explanation of loss causes.

A senior SBC official, speaking anonymously, confirmed receiving IDRA’s letter and said SBC’s board would discuss the issue and respond. Attempts to obtain comment from IDRA’s spokesperson were unsuccessful.