Bangladesh has agreed to abolish the long-standing requirement for non-life insurers to reinsure at least 50% of their business with state-owned Sadharan Bima Corporation (SBC).
This move, embedded in the newly signed US-Bangladesh Agreement on Reciprocal Trade, marks one of the most significant financial sector reforms in the country.
Under the previous system, all non-life insurers were mandated to cede half of their reinsurance portfolio to SBC, guaranteeing the state-owned reinsurer a steady stream of premium income. The new trade agreement removes this compulsory cession requirement, including for US insurers, opening the market to full competition.
This reform represents a structural shift in Bangladesh’s insurance and reinsurance architecture, which has historically operated under a protectionist framework aimed at shielding the national reinsurer. Industry experts believe that the decision will liberalise the reinsurance market, allowing private and foreign reinsurers to compete freely without being forced to route business through SBC.
US insurers and global reinsurance firms are expected to be the primary beneficiaries, while domestic insurers will have greater flexibility in selecting reinsurance partners based on pricing, capacity, and risk diversification.
However, the reform is set to significantly erode SBC’s dominant position. The state-owned reinsurer has traditionally relied on compulsory cessions to secure predictable premium flows. Without this guaranteed pipeline, SBC could face increased competitive pressure to improve underwriting standards, pricing, and operational efficiency.
The reform has raised concerns within policy circles. In November last year, SBC sent a letter to the Financial Institutions Division of the Ministry of Finance, warning that the removal of the mandatory reinsurance clause could allow local insurers to reinsure abroad without restriction. This, it argued, could lead to substantial foreign currency outflows and increase the risk of money laundering through premium payments.
Analysts point out that foreign exchange concerns could be sensitive, especially given Bangladesh’s ongoing management of dollar shortages under an IMF-supported reform programme. A larger share of reinsurance premiums paid overseas would add pressure on the country’s balance of payments.
Proponents of the reform, however, argue that a competitive reinsurance market could strengthen risk management practices, improve service quality, and enhance the overall resilience of the insurance sector.
