Metro rail contractor, IDRA at odds over insurance coverage

A foreign contractor of the metro rail project has threatened to go for entire insurance coverage of his part of works abroad unless the insurance regulator stops pushing it to have 50 per cent coverage from state-run Sadharan Bima Corporation (SBC), sources said.  
Japanese company Tokyu Construction Co Ltd was awarded the job of civil works for soil improvement, land development and retaining wall at Uttara Depot of MRT Line-6, the country's first ever metro rail initiative, for which it needs insurance coverage.
Officials said, the contractor decided to appoint Green Delta Insurance Company Ltd as its sole local insurer, Swiss Re International SE as lead insurer, and the panel of international insurers as co-insurers.
When it sought no-objection certificate (NOC) from the Insurance Development and Regulatory Authority (IDRA) for having international insurance coverage through local agent, the insurance regulator suggested the company to include SBC also as local insurer alongside Green Delta Insurance, having 50 per cent equal share.
However, the Tokyu Construction dismissed the IDRA proposal.
"We cannot accept your proposal of a 50%-50% split between Green Delta Insurance and SBC, as SBC cannot guarantee a secure placement of the risk with international insurers of our selection," Hiroshi Asakami, general manager of the company, wrote in a recent letter to IDRA.
He also said, the project director of Dhaka Mass Transit Company Ltd is in support of his proposed insurance arrangements.   
"If IDRA cannot provide us the required NOC, the only option for us is to obtain required insurance cover from outside Bangladesh within eligible countries (as) per JICA guideline, such as Japan, in order to safeguard our interest in this major development project. In that case,  Bangladesh's insurance market will be deprived of insurance premium and the government will be deprived of VAT," Mr Asakami said.    
He also referred to the company's agreement with the government of Bangladesh and guidelines of Japan International Cooperation Agency (JICA) and said, "We are at liberty to go for required insurance coverage in respect of the project from any eligible country".
"We once again request you to review your decision for greater interest of the government and insurance sector in Bangladesh and favour us with NOC to obtain insurance from Green Delta Insurance with no more delay, as the construction of the works will commence very soon," he said.
Sources said, the company, in the past, had sought finance minister AMA Muhith's intervention to resolve the issue. In a letter to the minister, Mr Asakami said, preferential treatment is being given to SBC which does not fit with the good spirit and flexibility provided within the JICA loans.
When contacted, project director of Dhaka Mass Rapid Transit Development Mofazzel Hossain told the FE Friday, the contractor should follow laws of the land and the policy is that at least 50 per cent coverage has to be taken from the state-owned company.
When his attention was drawn regarding Tokyu Construction's liberty to have insurance coverage from any eligible country, as per contract with the government, he said he has no idea what the agreement says actually.
"I have to check the agreement to see what is mentioned there. If really they have the liberty for buying insurance, they should be allowed," he said.
Contacted, IDRA member Quddus Khan told the FE, the Tokyu Construction also needs NOC from the regulator before buying insurance coverage from abroad.
"We have given them NOC. If they have different views, we will sit with them to resolve the issue," he said.
Officials said, the country's Insurance Act does not allow any state-owned entity to get insured abroad. Rather, they are to get insurance coverage from SBC.
Earlier, the Bangladesh-India Friendship Power Company Limited (BIFPCL), the owning company of Rampal coal-fired power plant, had also sought waiver for its contractors from getting mandatory insurance coverage from local companies.
In June this year, Mr Muhith asked the power division for taking no-objection from IDRA to get the waiver.
SBC managing director (current charge) Shamim Akhter could not be reached immediately for a comment about Tokyu Construction's evaluation about the corporation's capacity.
But earlier she told the FE that the corporation has full capacity of providing insurance and re-insurance coverage to any company.
She said allowing any state-owned entity to have foreign insurance coverage will be in 'violation of the country's Insurance Act'.
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