Sadharan Bima owes Tk 364cr to 21 insurers
Twenty-one general insurance companies have reinsurance claims worth Tk 364.47 crore pending with state-run Sadharan Bima Corporation (SBC) as of March, which left them with a shortage of funds needed to pay their clients.
Reinsurance takes place when multiple insurance companies share risk by purchasing policies from other insurers to limit the total loss the original insurer would experience in case of a disaster.
Among the insurers, Islami Commercial Insurance has the highest amount, Tk 65.33 crore, of reinsurance claims pending with SBC, data from the Insurance Development and Regulatory Authority (IDRA) showed.
“We haven't been able to settle some big claims due to the delay in payment of the reinsurance portion by SBC,” said Mir Nazim Uddin Ahmed, managing director of Islami Commercial Insurance.
Pioneer Insurance has a pending reinsurance claim of Tk 47.24 crore. “We have been suffering badly from a fund crisis due to the delay in payment of the reinsurance claim,” said Md Manirul Islam, managing director of the insurer.
He said Aswad Composite Mills filed an insurance claim of Tk 148 crore in 2014 but still Pioneer Insurance hasn't been able to settle it fully due to the delayed payment from SBC.
Federal Insurance has pending claim involving Tk 41.43 crore, Northern General Insurance Tk 32.35 crore, Janata Insurance Tk 25.73 crore, Bangladesh General Insurance Tk 24.48 crore, Prime Insurance Tk 23.79 crore, Rupali Insurance Tk 22.93 crore, and Provati Insurance Tk 18.20 crore, showed IDRA data.
“Slow processing has caused the delay in the payment in some cases,” said Syed Shahriyar Ahsan, managing director of SBC. But, he said, SBC alone is not responsible for the delay, as there is a lack of proper documentation on the part of the insurance companies. “We are trying to speed up the claim settlement process,” he added.
There are some systemic problems in the government body [SBC] which caused the delay in the reinsurance claim settlement, said Farzana Chowdhury, managing director of Green Delta Insurance.
Reinsurance is a big industry but there is no separate law in Bangladesh on how much risk a single company will retain, said a senior executive of the IDRA.
He said there is no reinsurance company in the country and the same company is doing both insurance and reinsurance businesses. There is a lack of transparency in the reinsurance business, he said.
The insurance regulator has started to prepare a reinsurance guideline to regulate the business, he added.
Insurance companies are mandated to reinsure 50 percent of risk with SBC and the rest 50 percent is optional, meaning a company can share the risk either with local insurers or foreign insurers.
Insurers are less keen to share policies with foreign insurers. Of the 46 insurance companies in Bangladesh, only nine have insured their policies with foreign reinsurers.
The claim unsettlement rate of general insurers was more than 85 percent as of March, according to the IDRA.
