Biman\'s reinsurance cost goes down

Reinsurance cost to be borne by Biman Bangladesh Airlines next year has gone down despite having a large claim this year, officials said.
For the next one year, starting mid-July, the gross premium is set at US$5.40 million as against this year's $5.75 million.
After week-long negotiations, a six-member team led by managing director of Sadharan Bima Corporation (SBC) Syed Shahriyar Ahsan finalised the deal in London late last month.
Under the new deal, 14 aircraft of Biman are being reinsured by the foreign companies who will cover risks involving $842.10 million. On the other hand, the SBC will underwrite 2.0 per cent of the insurance coverage of Biman.  
The major underwriters of the reinsurance coverage include Global Aerospace, XL Catlin Syndicates, Tokio Marine Kiln, and Swiss Re.   
In the current year the national airlines already received two interim payments totalling $20.5 million against the engine damage of Boeing 777-200ER. The loss under the existing policy is estimated at $25 million which may in final claim be settled at $23 million, a senior SBC official said.
Asked about the reasons behind low premium of reinsurance despite having a large claim, the official said this time the negations were held more professionally than in the past.
Contacted over phone, Mr Ahsan told the FE usually the amount of reinsurance premium goes up during renewal of contract in the subsequent year if there is any large claim.
"People were expecting that the rate of reinsurance premium may go up for next year. But due to good negotiation we could bring it down," he said.
"It was a good deal," Mr Ahsan said, adding: "You can get low rate in reinsurance premium if competition can be created among the brokers and underwriters."
Meanwhile, a dispute between SBC and Biman over refund and payment of value-added tax (VAT) arrears still remained unsettled.
The airline management has been demanding refund of the money it had paid as VAT to the SBC along with aviation-premium insurance until 1998 under an exemption it received from paying VAT since 2013. The SBC management, on the other hand, has been pressing the Biman to pay the overdue VAT amount for the period between 1998 and 2013 so that it can deposit the money with the national board of revenue.
The government in 2013 exempted Biman from paying VAT on foreign portion of   reinsurance premium but it will have to pay VAT on its insurance coverage underwritten by local companies.
SBC officials said Biman did not pay VAT worth around Tk 138 million after 1998 on different pretexts and by taking recourse to legal actions, before getting the VAT exemption against reinsurance (abroad) in 2013.
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