Contractors covet foreign ins cover

Most contractors engaged in public-sector investment proposals, having foreign loans, crave for offshore insurance cover despite a legal barrier.
Officials disclosed such preference being placed by the bidders although the Insurance Act made it mandatory to get the works insured with the state-run Sadharan Bima Corporation (SBC).
Officials concerned smelt a lack of confidence on part of the potential clients in SBC in this matter.
They also opined that some contractors in this case prefer to have cover from insurance companies of their own countries instead of SBC.
The trend poses a great risk of outflow of finances in the form of insurance premiums by depriving the country, they noted.
In last three months the SBC has confronted at least seven such proposals, with the latest one last week for a road-sector project in Sirajganj district. One contractor of such an investment proposal had threatened to take entire insurance from abroad.  
The Prime Minister's Office (PMO) in March last year had decided to allow 50 per cent insurance coverage from abroad for Public-Private Partnership (PPP) projects, which contradicts the Insurance Act 2010. The SBC had opposed such decision when its opinion was sought.  
The section 23 (1) of the insurance act provides that 50 per cent of all insurance business related 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 may be placed either with that corporation or with any other insurer in Bangladesh.
As such, the law did not allow any public-sector entity to get insured abroad by taking into consideration the interest of local insurance companies.
In the recent months a contractor of metro-rail project had threatened to go for entire insurance coverage of his part of works.
The exemption from taking insurance from SBC was also sought in case of Bangladesh-India Friendship Power Company (Pvt) Ltd (BIFPCL), widely known as Rampal power plant.
Despite being a public-sector entity, exemption was also sought for a dual-fuel power plant of Sembcorp North-West Power Company Ltd.
Contacted over phone, SBC managing director Syed Shahriyar Ahsan told the FE despite the corporation being capable of providing insurance cover and underwriting liabilities for any large project, in some cases foreign contractors suffer from lack of confidence in it.
They think that being a state-owned entity the SBC will take a long time to settle claims and that's why they prefer insurance from abroad, he said.
"The law of the land does not allow any insurable entity to have coverage from abroad. Especially, public-sector entities will have to mandatorily take insurance coverage from the SBC," he said.
Asked whether any step is there to grow confidence among the possible clients in SBC, Mr Ahsan said he had asked the officials concerned to settle insurance claims as quick as possible, which may help in this case.
He agrees that there are some long-pending claims which need to be settled soon.
According to officials presently in SBC there are some 285 claims from its direct insurance coverage and Tk 8.0 billion worth of reinsurance claims remained pending.
Another official of the SBC said some contractors prefer to buy insurance from their own countries as they think they will be able to get claims settled quickly if issues arise.
He said in this case, instead of insurance coverage, the contractors are allowed to have reinsurance from their preferred insurance companies abroad. The SBC will settle their claims once their preferred reinsurance companies settle claims.
The SBC earned Tk 2.83 billion in 2015 and Tk 2.47 billion in 2014 as net profit.
    syful-islam@outlook.com