The government has taken a decisive step to stabilise the struggling insurance sector with the finalisation of the Insurance Resolution Ordinance 2025.

Modeled after the Bank Resolution Ordinance, the new law empowers the Insurance Development and Regulatory Authority (IDRA) to merge or liquidate financially weak insurers, establish a Crisis Management Council, and create a Claim Settlement Fund to protect policyholders.

While the ordinance prioritises safeguarding policyholders’ interests, it does not currently address the impact on ordinary investors in listed insurance companies, leaving uncertainties for shareholders.

Recently, IDRA Chairman M Aslam Alam held a meeting with insurance sector stakeholders to finalise the ordinance.

He emphasised giving utmost priority to the settlement of policyholders’ claims, and ensuring that owners or directors of troubled companies are not exempted during the merger process.

Aslam Alam told the Daily Sun that since the parliament is not in session, the ordinance was issued under emergency provisions with the approval of the President or the Cabinet.

He said, “The main purpose of issuing this ordinance is to take quick action in emergencies. It carries the same legal authority as an act of parliament but must later be ratified by parliament.”

He added that if the ordinance is not approved or is repealed within 30 days of being presented in parliament, it will become void.

“We expect the new government after the upcoming election to turn this ordinance into law,” he said.

Insurance expert and former CEO of Chartered Life, Ziaur Rahman, told the Daily Sun that not all insurers are performing poorly – only about 7-8 companies are failing to pay policyholders’ claims, which has tarnished the reputation of the entire sector.

He noted that merging weak insurers will be a time-consuming process, and while the ordinance includes a proposal for a fund, it relies heavily on government grants, which may not be forthcoming.

“The government is providing funds to rescue weak banks, but it’s unrealistic to assume it will do the same for insurers, especially when IDRA still hasn’t resolved the Tk3,500 crore embezzlement case from Far East Islami Life five years ago,” he said.

What the ordinance includes

When asked, the IDRA chairman said the ordinance does not include a specific section addressing stock market investors, as IDRA’s primary responsibility is to protect insurance companies and their policyholders – though he noted the issue “will be considered.”

Under the newly finalised Insurance Resolution Ordinance 2025, the IDRA will have the authority to dissolve or liquidate any insurance company that is deemed non-functional or beyond recovery.

To ensure stability in the sector, a ten-member Crisis Management Council will be established. This council will advise IDRA on ways to restore confidence and maintain financial stability within the insurance industry.

The ordinance also empowers the government or IDRA to temporarily take ownership of any insurer or to transfer its shares to a state-owned entity if deemed necessary for protecting policyholders and the market.

Similar to the provisions in the Insurance Act 2010, all insurance companies will be required to settle policy claims within 90 days after the maturity of a policy.

To manage financially distressed companies, IDRA may appoint administrators or establish bridge insurance institutions.

These temporary institutions can operate for up to five years before transferring ownership back to private entities.

Additionally, a Claim Settlement Fund will be created under the ordinance to ensure policyholders’ claims are protected and paid even if a company faces financial insolvency.

The state of the sector

According to the latest IDRA data, Bangladesh currently has 82 insurance companies – 36 life and 46 non-life. As of June 2025, life insurers settled only 35% of claims, while general insurers settled just 8.32%, leaving 92% of claims unresolved.

In monetary terms, life insurers faced total claims worth Tk5,574.9 crore, of which only Tk1,946.66 crore has been paid, leaving Tk3,628.32 crore pending – mostly with 29 companies.

Among non-life insurers, SBC (state-owned) owes Tk2,076 crore, followed by Green Delta (Tk270 crore), Pragati (Tk164 crore), Reliance (Tk101 crore), and People’s Insurance (Tk81 crore). Out of a total Tk3,605 crore owed by non-life companies, only Tk300 crore – just 8% – has been paid.

Currently, IDRA is conducting special audits on several financially troubled insurers, including Sunflower Life, Far East Islami Life, Sunlife, Padma Islami Life, Progressive Life, Protective Islami Life, Best Life, Homeland Life, Prime Islami Life, Jamuna Life, Diamond Life, Swadesh Life, Golden Life, Bayra Life, and NRB Islamic Life.

The reporter can be reached at: [email protected], Edited by Mohammad Mamunur Rashid