Bangladesh’s general insurance industry is projected to grow at a compound annual growth rate (CAGR) of 8.8%, from BDT64 billion ($620.8 million) in 2023 to BDT89.8 billion ($809 million) in 2027 in terms of gross written premiums (GWP), according to GlobalData, a leading data and analytics company.
According to GlobalData’s Insurance Database, the general insurance industry in Bangladesh grew at an estimated 9.6% in 2022. It is expected to grow at a similar rate over the next five years, supported by favorable regulatory developments to improve market practices aimed at enhancing customer confidence and increasing insurance penetration.
Aarti Sharma, Insurance Analyst at GlobalData, Comments: “Bangladesh’s general insurance penetration stood at 0.15% in 2022, which is significantly lower compared to the penetration in regional economies such as India (0.95%), China (1.17%), and Japan (1.73%). To increase insurance awareness and attract new customers, the Government of Bangladesh and the Insurance Development and Regulatory Authority (IDRA) have proposed a series of steps to boost general insurance growth.”
The first major development towards increasing penetration is the introduction of a regulation on bancassurance in the country in 2023 to allow local banks to collaborate with life and general insurers to sell insurance products. The proposal is currently pending approval with the Ministry of Finance. Once implemented, Bancassurance will improve the financial literacy of the country’s population and increase awareness, which will support insurance growth.
Aarti continues: “In April 2023, the IDRA proposed changes in the solvency margins that the general insurers need to maintain their risk-bearing capacity. Insurance companies would be required to maintain the new solvency margins by establishing reserves from their profits or by injecting fresh capital.”
The previous regulation mandated general insurers to maintain a 40% risk reserve of the net written premium for all lines of business. However, the new draft has different reserves as per the lines of business in which the insurer is operating. This includes a 40% reserve for fire insurance, a 50% margin each for marine and marine hull insurance, a 40% for aviation insurance, and a 100% margin for motor, health, and miscellaneous insurance.
Aarti adds: “Once implemented, the amended limits will help in strengthening the solvency position of general insurers’ and improve risk management, thereby instilling consumer trust and supporting general insurance growth.”
To improve penetration, IDRA is also promoting microinsurance products targeting low-income individuals. These are for risks pertaining to property damage, including crop and livestock due to extreme weather events.
Aarti concludes: “Government schemes for low-cost insurance products, regulatory support, and bancassurance are expected to play a pivotal role in increasing insurance penetration in Bangladesh over the next five years and supporting growth in the general insurance business.”
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