Two state entities---the Biman Bangladesh Airlines and the Sadharan Bima Corporation (SBC)--- are now caught in a row over sharing commission derived from reinsurance abroad, officials said.
The national flag carrier claims that as the insurer the Biman itself is supposed to get the commission, as it pays the premium. On the other hand, the SBC says the Biman cannot demand the commission, as it is not a broker or commission agent.
The problem surfaced, as the SBC, for the first time, did not pay any portion of the reinsurance commission to the Biman in fiscal year 2019-20.
Before that the corporation was paying some 55 per cent of the amount to the Biman it had been getting from the foreign reinsurers.
The Biman authority, in a letter in last October, said the SBC got reinsurance commission at a fixed rate from the reinsurers every year. From that amount the SBC kept around 45 per cent, and the rest was given to the Biman.
Mokabbir Hossain, the then Biman managing director, in the letter further said the amount that the SBC got as reinsurance commission was ultimately being paid by the national flag carrier.
"In that consideration the Biman's spending will reduce, if the commission for the SBC is lowered."
The letter also mentioned that the Biman was supposed to get the entire amount that the SBC had got as reinsurance commission from abroad.
The Biman authority in the letter to the Ministry of Civil Aviation and Tourism requested to take proper steps, so that it could get up to 95 per cent of the commission derived from reinsurers.
However, the SBC opposed the claim, and said the SBC underwrote the insurance risk for the Biman and other state-owned enterprises in line with the Insurance Corporation Act.
The corporation bore a portion of the risk, and the rest was re-insured by foreign reinsurers. In this process, the SBC got commission from the foreign reinsurers according to the international law.
"Usually, the reinsurers provide the commission (to the SBC), considering the service and management cost of the insurers," SBC Managing Director Syed Shahriyar Ahsan said in a letter to the Financial Institutions Division.
Referring to the Section 58 of the Insurance Act 2010, he said none but only the agents and brokers can get insurance commission. "Since the Biman is a policy buyer, it cannot get commission in line with the insurance act."
While opinion of the Insurance Development and Regulatory Authority (IDRA) was sought in this regard, the regulator also referred to the insurance act, and said the Biman lawfully could not demand any insurance commission.
SBC deputy general manager Jakir Hossain told the FE that the corporation got the reinsurance commission to meet its operation and management costs.
The SBC, in line with a decision of its board of directors, had been paying the Biman a portion of the amount to lower the national flag carrier's premium cost.
"The Biman as a policy buyer cannot claim commission."
Mr Hossain noted that during the last two years, including the Covid-19 pandemic period, the aviation industry faced serious financial loss. The aviation reinsurers subsequently raised their rate and lowered commission.
So, the SBC could not pay any amount to the Biman in fiscal year 2019-20, he said.
Replying to a query Mr Hossain also said the Biman had been demanding to lower the reinsurance premium, but there was no scope for that.
"So, we're paying a portion of the commission that we get from the reinsurers to the Biman," he added.
syful-islam@outlook.com