The Sadharan Bima Corporation (SBC) has sought mandatory insuring of public property with the state-owned insurance firm under provision of the existing law to prevent massive premium flight.
Officials said the corporation has made the plea to the government in fear of possible outflow of insurance premium as many of the public-sector entities and joint-venture companies try to buy insurance coverage from abroad instead of taking it from the SBC.
The amended section 23 (1) of the Insurance Act says: 'Fifty per cent of all insurance business relating to any public property or to any risk or liability appertaining to any public property shall be placed with the Sadharan Bima Corporation and the remaining fifty per cent such business may be placed either with that corporation or with any other insurer in Bangladesh'.
The act does not permit any public-sector entity to get insurance coverage from abroad in view of interest of local insurance companies.
A senior official at the Ministry of Finance (MoF) said in recent days the government has been carrying out massive development works either with foreign loans or under joint venture. In most cases, foreign companies involved with the projects prefer to buy insurance coverage from abroad instead of SBC, which contravenes the country's insurance act.
"Such move also runs counter to the interest of country's insurance companies," he added.
Citing an example, the official said a contractor of metro-rail project had threatened to go for entire insurance coverage of his part of works from abroad as the insurance regulator had been pushing it to have 50 per cent coverage from the SBC.
He mentioned that the Bangladesh-India Friendship Power Company (Pvt) Ltd (BIFPCL) sought exemption from taking insurance from SBC and wanted to buy it from abroad. The MoF had asked the company to take permission from the Insurance Development and Regulatory Authority (IDRA).
Recently, exemption was also sought for a dual-fuel power plant of Sembcorp North-West Power Company Ltd which is a government entity. Thereafter, the IDRA sought opinion of SBC as to whether the company can be given permission for buying insurance coverage from outside the country.
In reply, the SBC management said it is contrary to the relevant section of insurance act and goes against the interest of local insurance industry.
SBC managing director Syed Shahriyar Ahsan in the letter requested the IDRA to take steps to incorporate a paragraph into agreement papers of public-sector projects to be undertaken in the future that their insurance coverage mandatorily has to be taken from SBC.
Contacted Sunday, Mr Ahsan told the FE that the SBC has the capacity to bear risk coverage of an entity of any size. It also underwrites the risk coverage of private-sector insurance companies.
"Many public-sector entities are trying to get insurance coverage from abroad, which contradicts country's insurance act and goes against the interest of local insurance companies," he said.
Mr Ahsan said the country would be financially deprived if any company is given permission to take insurance coverage abroad.
"The government can strictly enforce the insurance act to avert such requests for allowing companies to buy insurance coverage from outside the country," he noted.
When contacted over the contentions, IDRA member Quddus Khan told the FE Sunday his office considers any such application by keeping in mind relevant rules of the insurance act.
"If any special circumstance arises, we consult government high-ups on the issue," he said.
He, however, could not confirm whether so far any public entities were given permission to take overseas insurance coverage.
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