Malfunctioning insurance cos now up for merger or liquidation

Malfunctioning insurance firms may also face merger or liquidation under a new reform recipe of the interim government, hot on the heels of banking-sector overhaul drive.
Sources say the insurance regulator has finalised the Insurer Resolution Ordinance 2025, paving the way for sweeping insurance reforms the way the banking-sector problems are being fixed, starting the mergers of five hollowed Islamic banks into a big one.
The Insurance Development and Regulatory Authority (IDRA), which oversees 82 life and non-life insurance companies, has finalised the draft law in consultation with industry stakeholders.
The ordinance has been submitted to the Financial Institutions Division under the Ministry of Finance for necessary action.
"We submitted the ordinance on November 05 after incorporating several corrections suggested by stakeholders," says an IDRA official.
Once enacted, the law will empower the authority to appoint administrators in troubled insurers, dissolve their boards, and transfer viable portfolios to newly created bridge entities.
The avowed main objective of the move under the post-uprising regime is to "protect policyholders' interests and restore confidence in the insurance sector".
The ordinance also authorises the regulator to recover assets misappropriated through unauthorised means.
To enforce the new law, the IDRA plans to establish a dedicated resolution cell.
A special fund-comprising contributions from the government and development partners, including the World Bank's International Development Association (IDA), the Asian Development Bank (ADB), the International Bank for Reconstruction and Development (IBRD), and the Islamic Development Bank (IsDB)-will be created to support the resolution process.
Under the proposed framework, insurers could face management restructuring, mergers, or even liquidation as part of an ambitious effort to align the industry with the ongoing banking-sector reforms.
Modelled on Bangladesh's bank-resolution mechanism introduced by the interim government, the ordinance would grant the IDRA broad authority to intervene in financially distressed firms, transfer their assets and liabilities, or establish bridge insurers to safeguard policyholders.
Industry-insiders say the move could mark a turning point for a sector where several life insurers have been accused of failing to settle maturity claims, eroding public trust.
While non-life insurers are considered financially stronger, both segments will fall under the ordinance's purview.
Bangladesh's insurance penetration remains among the lowest in South Asia, hampered by chronic delays in claim settlement, opaque practices, and weak corporate governance.
Non-performing claims and recurring allegations of irregularities have long deterred households from purchasing coverage, despite rising risks linked to health, accidents, and climate change.
"The authority will have the power to liquidate distressed companies and facilitate ownership changes, mergers, or other restructuring," says an official familiar with the developments in cleanup recipe.
"In special cases, the government or development partners may step in with bridge financing to ensure a smooth transition and protect policyholders," he adds.
Bangladesh currently has 46 non-life and 36 life insurance companies operating under IDRA's supervision.

jasimharoon@yahoo.com