New law planned to protect insurance clients as 6 firms embezzle Tk3,736cr

Infograph: TBS

Highlights:

• Six insurers embezzled Tk3,736 crore in policyholder premiums
• New law proposed to recover embezzled insurance funds
• Directors used fake investments, inflated land deals for fraud
• Fareast Islami Life alone owes Tk2,753 crore
• IDRA seeks subsidies, bank loans to refund policyholders
• Nearly 1.1 million policyholders can't recover their insurance dues

While insurance companies are meant to protect clients' funds, six firms have done the opposite, with officials alleging that their sponsor directors embezzled client premiums under the guise of investment.

The companies – Fareast Islami Life Insurance, Padma Islami Life Insurance, Baira Life Insurance, Golden Life Insurance, Sunlife Insurance, and Sunflower Life Insurance – collectively owed policyholders Tk3,736 crore as of December last year.

Now, the Insurance Development and Regulatory Authority (Idra) is planning to introduce a new law with a view to recovering the embezzled premium funds, officials said.

The "Insurance Resolution Ordinance", modelled after the Bank Resolution Ordinance, will allow the selling of the assets of sponsor directors of the companies and facilitate ownership changes, liquidation, or mergers of the troubled companies.

In addition, the regulator is also working to secure government subsidies to fully or partially refund the affected policyholders and arrange bank loans in favour of these troubled companies.

"Just as the Bank Resolution Ordinance allows for changes in bank ownership, a similar Insurance Resolution Ordinance will be introduced to restructure ownership of these insurance firms," Idra Chairman M Aslam Alam told The Business Standard.

"Additionally, efforts will be made to recover embezzled funds by liquidating the personal assets of the directors involved in the fraud," he said.

According to the Idra chairman, while the Bangladesh Bank has provided over Tk20,000 crore in funding to rescue 10 struggling banks, Idra has no provision to offer such financial support to troubled insurance companies.

However, the move has stalled due to opposition from well-performing insurance companies, he said.

"We are trying to ensure that the government allocates subsidies in the budget to repay the dues of policyholders. If that's not possible, we're seeking bank loans under the companies' names so that at least a portion of the dues can be returned," he added.

Meanwhile, Green Delta Insurance has already taken over the ownership of Sunlife Insurance by purchasing shares from the company's sponsor-directors. A formal agreement between the two companies has already been signed.

Bank-like embezzlements

"Just as some bank owners syphoned off money in the name of loans, the owners of these six life insurance companies embezzled policyholders' premium money under the guise of investment," the Idra chairman told TBS.

"Although they claimed to have invested in various sectors on paper, in reality, no such investments were made," he added.

Padma Islami Life Insurance owes around Tk250 crore, Baira Life Insurance Tk78 crore, Sunflower Life Insurance Tk563 crore, and Sunlife Insurance Tk55 crore. The exact liabilities of Golden Life Insurance are not available, but as of last September, its dues stood at Tk37 crore.

As of December, Fareast Islami Life Insurance has the highest outstanding liabilities, with dues to policyholders amounting to nearly Tk2,753 crore.

M Aslam Alam said Fareast opened branches across the country to collect deposits or premiums from clients, embezzled the funds, and then shut down the branches. "The company is no longer in a position to operate. The other five companies are also on the verge of bankruptcy," he added.

A special audit report on Fareast Islami Life revealed that Tk2,367 crore was embezzled from the company, in addition to irregularities involving another Tk432 crore. The Anti-Corruption Commission found that the embezzlement was carried out by the company's former chairman Nazrul Islam, former director MA Khaleq, former CEO Md Hemayet Ullah, and several other senior officials.

According to the audit, the embezzlement was carried out mainly through three schemes: purchasing land at inflated prices, securing loans against the company's Mudaraba Term Deposit Receipts (MTDRs) held in various banks, and making harmful investments.

From 2013 to 2017, Fareast Islami Life purchased land in 14 locations including Dhaka, paying significantly more than the market price. Seven of these transactions alone involved embezzlement of Tk665 crore under the pretext of land purchases, construction, and sand-filling.

One case involved a plot of 786 decimals in Mirpur's Goran Chotbari, recorded as purchased for Tk199 crore, though the actual price was just Tk19 crore. Of the reported Tk199 crore, Tk64.38 crore was paid by cheque to various individuals and firms.

Among them, International Trading, KDC Construction, and Mahbuba Associates received Tk40 crore via cheque, with an additional Tk1.29 crore listed as registration fees. The remaining amount was paid in cash.

Other embezzlements include Tk160 crore for land on 72 Kakrail, Tk89 crore for land on Gulshan North Avenue, Tk80 crore for two other plots in Gulshan, and Tk10.7 crore for land in Alekanda, Barishal.

Documents from three land deals show that the Kakrail property was purchased from Nazrul Islam's father-in-law, Md Mofizul Islam, and his brother-in-law, Selim Mahmud. After the sale, Mofizul Islam and Selim Mahmud gifted Tk115 crore to Nazrul's wife, Taslima Islam, who in turn gifted Tk50 crore to her husband. Nazrul Islam is currently in jail.

Regulator in a fix

In March 2025, the Idra held a governance review meeting with the directors of the six insurance companies, during which the chairman urged them to promptly settle outstanding policyholder claims. These companies had already been identified as high-risk, with the Idra repeatedly pressing them to clear pending payments. However, previous warnings had yielded little progress.

In April, the Idra instructed the companies to submit a detailed plan for settling the overdue claims, as they had failed to make payments to policyholders. The regulator asked for a three-month action plan outlining the amounts they can pay within this period and any financial challenges they are facing.

Since independence, Bangladesh's insurance sector has been marred by widespread irregularities and customer harassment. Successive governments granted insurance licences largely on political grounds.

Although the commerce ministry and later the Financial Institutions Division served as regulators, the government established the Insurance Development and Regulatory Authority (IDRA) in 2010 to oversee the sector.

However, due to the influence of corruption-ridden insurance companies, no IDRA chairman has been able to complete their term in peace.

Nearly 1.1 million policyholders are currently unable to recover their dues from various insurance firms. "Policyholders have been running from pillar to post for months but are still not getting their money back. These companies are practically bankrupt," said the Idra chairman.

Meanwhile, Bangladesh Insurance Association (BIA) President Sayeed Ahmed told TBS that they have not been informed of any government policy on merging or dissolving weak insurance companies.

"So, it would be premature to comment on the matter now," he said. "But as most of these companies are listed on the stock market, any move toward merger or closure must protect the interests of investors and shareholders," he said.