A number of fresh applications from big infrastructures projects were submitted to the insurance regulator, seeking its approval for insuring with foreign insurers which, industry insiders say, is a clear violation of the existing act.
People familiar with the development told the FE that such two applications seeking 'no objection certificate (NOC)' were submitted to the Insurance Development and Regulatory Authority (IDRA). Earlier, the insurance regulator approved a few such applications including much-talked-about Rampal Power Plant project.
And some more applications are now awaiting approval.
There is 'hide-and-seek' about the proposed premiums as they usually don't mention the rates and the amount of premiums.
However, the IDRA recently issued NOC in favour of Rampal Power Plant project despite the fact that Sadharan Bima Corporation (SBC) raised objection to it.
It usually argues in written to the IDRA about its capacity of handling such risk coverage.
Insurance industry insiders say that due to such type of insurance from overseas parties, the National Board of Revenue (NBR) has been incurring losses as it is not getting adequate amount of resource as value added tax (VAT).
If insurance is covered for Tk 1.0 billion, the revenue authority is supposed to get Tk 150 million in VAT at a rate of 15 per cent.
On the other hand, many tend to believe that there is large scope for money laundering through such type of overseas insurance coverage.
If insurance is covered at the amount quoted, in real sense it may be much lower in such cases, money laundering may happen.
Under the rules of 1984, any public property -- movable or immovable -- must be insured with the SBC.
According to insurance ordinance of 1984, any public property must be insured with the SBC.
When the government approved functioning of the private insurance firms, insurance corporations (amendments) act 1990 was enacted which states that 50 per cent will go to SBC and the remaining 50 per cent to the private insurance companies.
However, under the section 23 of the insurance act 2010, there is provision for overseas insurance coverage if the authority thinks that the SBC and local insurers will not be able to handle such risk coverage.
Currently, two fresh applications were submitted -one from Acorn Infrastructure Services which sought NOC from the IDRA for overseas insurance coverage for setting up an independent power plant and another from SS Power seeking exemption from the SBC and other local insurers for setting up its two power plants in Chittagong.
When contacted, IDRA Member Gokul Chand Das told the FE, "There are some arrangements between the power division and power plants [for such type of insurance coverage]."
He, however, didn't elaborate the issue further.
On the other hand, SBC managing director Syed Shariar Ahsan told the FE that this type of overseas insurance is a clear violation of the act of the land.
He said the SBC has the capacity of handling such type of insurance as it did earlier.
He said this is not only eroding the profitability of the SBC but the NBR is also deprived of VAT and other types of taxes.
The SBC pays around Tk 400 million as non-tax revenue to the national exchequer a year.
The SBC chief also said such type of insurance is also impacting the local insurance market in a sense that they are 'distorting' the local tariff significantly.
The foreign rates, in some cases, were low following existence of economies of scales there. The Bangladesh's non-life market which stands rightly at around Tk 24 billion by premium earnings, still remained below its potential.
Earlier, the IDRA issued NOC for Padma Bridge project and another LNG project to buy overseas insurance.
The SBC has underwritten the risk coverage of a coal-fired power project to be implemented at Matarbari which will have an annual insurance premium of US$ 16 million from the $4.0 billion power project.
jasimharoon@yahoo.com