Bangladesh: Tussle over insurance of public-sector projects
Source: Asia Insurance Review | Nov 2016
A tussle has erupted over the insurance of public-sector projects because contractors of such projects want to insure them with only foreign or local private-sector insurers, a move which would breach the insurance law.
The crux of the problem is conflicting rules. Under the existing insurance law of Bangladesh, a public property has to be insured only with state-owned Sadharan Bima Corporation (SBC). After private players entered the insurance sector in the 1980s, SBC’s monopoly on public property insurance came under scrutiny. In 1990, a deal was signed between the Bangladesh Insurance Association, private insurance companies, and SBC under which only SBC would issue the insurance policy for public property but would share 50% of the premiums with private insurers.
However, government agencies in charge of the projects have signed contracts with foreign parties without knowing the insurance law of the country, reported the Daily Star. The agencies allow investors to choose their insurers which could be foreign or local. Foreign contractors have put clauses in these contracts that they are not bound to insure their projects in Bangladesh. In addition, the deals are signed after the Law Ministry’s vetting.
“Local insurers lack expertise”
Officials of the Insurance Development & Regulatory Authority said that they would advocate that the different ministries, which own the development projects, adhere to the insurance law, reported The Financial Express.
“We believe that if foreign contractors or big local contractors are aware of the law concerned, then they will refrain from asking for foreign risk coverage,” said a person involved in such projects.
On the other hand, sources said that local insurers lack the expertise to provide cover for such projects. In addition, the cost of insuring with foreign companies is lower.