Pvt insurers want to see SBC as only re-insurer

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Ismail Hossain
State-owned Sadharan Bima Corporation (SBC) and country's top private non-life insurance companies are in a row over insurance underwriting rights by the government corporation.
Country's top general insurance companies under the Bangladesh Insurance Association (BIA) umbrella have been lobbying the government high ups for strengthening SBC as the only re-insurance company.
On August 11, a BIA team placed a number of demands to the Finance Minister AMA Muhith including the demand to strengthen the lone government non-life insurance company as a re-insurance company rather than as a market competitor with other insurers.
Industry players said such demands have been coming from top general insurance companies as they have become big in terms of premium earnings.
SBC earned a net profit of Tk 1.26 billion in the year 2010 an increase by 24 per cent or Tk 240 million from the previous year.
The corporation earned a total premium of Tk 5.75 billion and settled total claims amounting to Tk1.51 billion. The corporation paid Tk 274 million as income tax and Tk 200 million as dividend to the government.
A SBC source said they expect 20-25 per cent increase of net profit in the current year.
Like the private sector, the government has to insure its assets and properties. Bulk of the government insurance premiums comes from Biman Bangladesh Airlines, shipping, energy and fertiliser companies and from imports and exports and different government infrastructure projects.
Industry insider said smaller non-life insurers do not want the underwriting rights of SBC to be abolished as they are benefited.
During the Ershad regime, the government decided that government owned projects should be brought under the coverage of the state-owned insurance company. But the premium income and the claim liabilities should be shared with a private sector company on a 50-50 basis. Country's 43 general insurance companies are getting equal share of that 50 per cent income which benefits many smaller companies whose individual market performance are poor.
Industry insiders said this is another reason of resentment of top insurers as they think it is not fair to have all insurance companies share the 50 per cent government premium equally as not all the players are performing the same in the market.
When asked about the matter, General-Secretary of BIA Molla Nurul Islam told the FE that re-insurance itself is a vast subject which the SBC should only deal with.
"If SBC is engaged in too many things including underwriting from government and private sector they would not perform well as the country's lone re-insurance company," he said.
Currently, all the 43 non-life insurers in the private sector likewise have to cede 50 percent of their re-insurance business to the state-owned corporation. This system allowed by the Insurance Corporations Act 1973 is considered detrimental.