Standard Insurance is not paying GerBan Fibres’ insurance claim in violation of the law

Abdur Rahman Abir: Standard Insurance Limited is not paying the outstanding insurance claim of Hamburg-based GerBan Fibres Limited in violation of the Insurance Act and IDRA’s directives. After keeping the claim pending for a long three years, the insurance company rejected it on the pretext that the customer had not filed a lawsuit against the cargo-carrying vessel.

However, the Dispute Settlement Committee of the regulatory body IDRA has described Standard Insurance’s decision to reject the insurance claim as completely illegal, ineffective, and contrary to the principle of utmost good faith. At the same time, the authority has given the company 30 days to pay the customer’s full insurance claim along with interest as a penalty for the delay.

Yet, even after this directive issued by the regulatory body on 11 June, Standard Insurance has still not paid GerBan Fibres’ insurance claim.

According to sector stakeholders, the rejection of a “General Average” claim is unprecedented in the insurance sector and carries an extremely negative message for the country’s image in the outside world. Such activities by Standard Insurance in violation of the Insurance Act and IDRA’s directives are contrary to the overall discipline of the financial sector and public confidence.

It may be recalled that on 17 June 2015, IDRA suspended the licence of Standard Insurance on allegations of irregularities in fire insurance and failure to arrange reinsurance. However, as the company continued to violate the law even during the suspension period, the regulatory body cancelled its licence on 10 November of the same year. Subsequently, through legal proceedings in the higher court and subject to compliance with conditions, Standard Insurance regained permission to do business.

Jute products of GerBan Fibres damaged in cargo accident

GerBan Fibres Limited, a joint-ownership jute processing industrial enterprise based in Germany and Bangladesh, is mainly engaged in the processing of jute and various natural fibres and the production and export of yarn and other products from them. This private enterprise is located in the Bhangageat (Nowapara) area of Abhaynagar Upazila in Jashore.

According to information, on 14 April 2022 a cargo vessel carrying jute products of GerBan Fibres left Chattogram Port for Singapore. Shortly after leaving the Karnaphuli River, at around 10:45 at night, it collided with an oil tanker named “Orion”. As a result of this accident, three containers of the vessel were severely damaged and GerBan Fibres’ entire cargo was identified as a total loss.

Subsequently, on the basis of local and foreign surveyors’ and General Average (GA) reports, the amount of the insurance claim was determined at Tk 67 lakh 41 thousand 820 and the General Average Adjuster fee at USD 1,536.60. In this context, GerBan Fibres formally applied to Standard Insurance for compensation within the stipulated time along with all necessary documents as per the rules.

Truth of total loss confirmed in local and foreign surveyors’ reports

The marine insurance policy number of GerBan Fibres under Standard Insurance is SIL/HO/PRB/MP-0099/04/2022 (Export). After the accident, the vessel authorities completed a joint inspection through General Average (GA) and the Marine Cargo Office (MCO) at the transshipment point.

This inspection confirmed that the jute products in three of the vessel’s four containers had been completely damaged.

Subsequently, Standard Insurance’s own surveyor firm Baltic Control (BD) Limited inspected the accident site and the damage to the goods. Their final survey report also confirmed that the jute products in the three containers had been completely destroyed (total loss).

On the basis of these local and foreign reports, GerBan Fibres raised a total insurance claim of Tk 69 lakh 24 thousand 675.

Three years pass with assurances of claim settlement

According to Section 72 of the Insurance Act 2010, it is mandatory to settle non-life insurance claims within 90 days of submission of all necessary documents. However, in the case of GerBan Fibres, Standard Insurance delayed for more than three years and at the last moment rejected the claim as completely baseless on the pretext of Clause 16(2) of the marine insurance policy.

Yet, in a letter dated 9 August 2025, Standard Insurance had informed the customer that it was continuously pressing the reinsurance company Sadharan Bima Corporation for approval of the claim and that the matter was under process. The company had assured that the claim would be settled quickly once the reinsurer’s approval was received as per the agreement.

But this sudden rejection after keeping the customer reassured for a long time has raised questions about the company’s sincerity in paying the insurance claim.

Misinterpretation of the law in rejecting the claim

After the accident, GerBan Fibres raised the insurance claim with Standard Insurance along with all necessary documents as per the rules. However, after delaying for nearly 35 months, walking the exact opposite path of its earlier assurances, the insurance company rejected the claim on 20 August by citing Clause 16(2) of the marine insurance policy and describing it as baseless.

Standard Insurance’s argument was that the customer’s failure to take legal action against the original carrier (the transporting vessel) had prejudiced the insurer’s “subrogation” right.

However, in its legal analysis, IDRA’s Dispute Settlement Committee clearly stated that under Section 79 of the Marine Insurance Act 1906, an insurance company acquires the right of subrogation only after it has “actually paid” the compensation money, and not before payment.

Therefore, rejecting the claim in this manner after keeping it pending for a long three years is a clear violation of Section 72 of the Insurance Act 2010 and amounts to “bad-faith claims handling”.

Defiance of IDRA’s directive; Dispute Settlement Committee’s verdict not implemented

As the insurance claim was not paid even after a delay of 35 months, GerBan Fibres applied to the Insurance Development and Regulatory Authority (IDRA) on 22 July 2025. In response, a tripartite meeting among Standard Insurance, Sadharan Bima Corporation and GerBan Fibres was held on 4 August on IDRA’s initiative. At the meeting, the regulatory body directed Standard Insurance to pay the customer’s compensation within 15 working days.

But defying that directive, Standard Insurance rejected GerBan Fibres’ insurance claim in a letter dated 20 August 2025, describing it as baseless.

Subsequently, on the advice of IDRA, on 8 September of the same year GerBan Fibres submitted a formal application to the Chairman of the Dispute Settlement Committee. After prolonged hearings, on 11 June 2026 the Dispute Settlement Committee delivered its verdict in this case (No. 57/2025).

In the verdict, Standard Insurance was specifically directed to pay the principal claim of Tk 67 lakh 41 thousand 820 and the General Average fee of USD 1,536.60 within the next 30 working days. At the same time, as a penalty for the long delay, an order was given to pay the full amount with interest by adding an additional 5% commercial premium to the prevailing bank rate on the principal claim.

However, nearly three months have passed since this final verdict of the Dispute Settlement Committee, yet Standard Insurance has still not settled GerBan Fibres’ insurance claim.

Standard Insurance at risk of licence cancellation

According to insurance experts, the rejection of a claim related to General Average (GA), which is recognised in international marine insurance, is unprecedented in world trade. Failure to pay the customer’s compensation even after clear directives and imposition of a penalty by IDRA and its Dispute Settlement Committee essentially amounts to challenging the legal authority of the regulatory body.

In such a situation, to protect the confidence of general insurance customers and restore order in the market, IDRA may take the ultimate administrative step of cancelling the company’s licence in accordance with the Insurance Act 2010.

Sector stakeholders say that this is not the first instance of Standard Insurance violating the law. Earlier in 2015 as well, IDRA had first suspended and later cancelled the company’s licence on charges of reinsurance fraud and multiple regulatory violations. Experts believe that the repetition of the same kind of legal defiance is casting an extremely negative influence on Bangladesh’s image in international maritime trade.

On this matter, General Secretary of the insurance professionals’ organisation BIPS, A.K.M. Ehsanul Haque (FCII), said that the GerBan Fibres case is not merely the negligence of a domestic company; rather, it has dealt a major blow to the image of Bangladesh’s insurance sector on the international stage. In the global insurance industry, examples of rejecting General Average (GA) claims are generally not seen. Standard Insurance’s this step has set an extremely negative precedent.

Non-life insurance expert A.K.M. Ehsanul Haque is of the view that such unprofessional behaviour with Hamburg-based GerBan Fibres is sending a wrong and negative message about Bangladesh’s insurance sector to the outside world, which is harmful for overall trade.

Spokesperson of the Insurance Development and Regulatory Authority (IDRA) Saifunnahar Sumi said that if the company disobeys the authority’s directive regarding the payment of GerBan Fibres’ lawful insurance claim, the authority will take necessary legal measures subsequently.

When contacted on this matter, Chief Executive Officer of Standard Insurance Limited Md. Abdul Matin Sarkar said he was in a meeting and wanted to speak later. However, despite being called several times afterwards, he did not respond.