Marine insurance rebounds as dollar crisis eases

The marine insurance business of general insurance companies in Bangladesh has started to recover gradually, despite having gone through a major crisis in 2024. 

During that time, the country faced an acute dollar crisis, which severely impacted import-export trade. As a result, the opening of Letters of Credit (LCs) declined dramatically, causing the marine insurance business to fall by nearly half.

However, industry insiders say the situation began to improve from the first quarter of 2025. With the revival of import-export activities, the number of LCs being opened has increased, which has directly boosted the marine insurance sector. Since marine insurance is heavily dependent on trade activities, the resumption of commercial operations has revitalised this line of business for insurance companies.

According to industry sources, nearly 60% of general insurance companies' business comes from marine insurance. The dollar crisis of recent years has posed significant challenges for this segment.

An analysis of the financial statements of 41 insurance companies listed on the Dhaka Stock Exchange (DSE) for the January–March 2025 quarter shows that 19 companies managed to increase their profits compared to the same period last year. On the other hand, 22 companies experienced a decline in profits over the same period.

Marine Insurance refers to a type of insurance that provides financial protection against losses or damages to ships, cargo, and associated marine assets during transportation by sea or river. 

It is generally divided into two main categories– Marine Hull Insurance (for vessels) and Marine Cargo Insurance (for goods). This type of insurance typically covers losses resulting from shipwrecks, collisions, storms, theft, and other unforeseen incidents.

Khawja Manzer Nadeem, Managing Director of United Insurance, stated that due to the dollar shortage, banks were issuing LCs only for essential goods. Consequently, the marine insurance business declined by 35% to 40%. 

He explained that a significant portion of the country's marine insurance business depends on the import of goods by garment and industrial enterprises, which has been gradually normalising since January.

As a result, overall business in the marine insurance sector has grown by more than 15%. However, growth rates vary from company to company.

He expressed optimism that this growth will continue in the future. However, he also warned that if the US imposes additional tariffs, it could hurt the garments sector, which may in turn negatively impact the marine insurance sector. He noted that these decisions have not yet been finalised.

At the end of the March quarter, the non-life insurance sector had over Tk3,151 crore in unpaid claims to policyholders. During this period, several companies had particularly low claim settlement ratios: Sikder Insurance settled only 0.12% of claims, Sena Kalyan Insurance 0.16%, Northern Islami Insurance 1.06%, Standard Insurance 1.44%, and Dhaka Insurance 1.59% – all of which were significantly lower than the average for other non-life insurers.

As a result, many policyholders are suffering, as they have not received their rightful compensation. In many cases, policyholders have not received their money even years after their policies matured.

Delays in claim settlements have caused prolonged suffering for policyholders, many of whom face severe financial hardship due to unpaid compensation. Although insurance law requires claims to be settled within 90 days, this rule is often not followed, according to industry insiders.

Insurance companies argue that they are legally required to reinsure 50% of their non-life policies through Sadharan Bima Corporation (SBC). While the remaining 50% can be reinsured with foreign companies, SBC's delays in settling their share are preventing insurers from paying policyholders on time.

However, some companies, to protect their reputation, pay claims from their funds.

Industry sources further noted that foreign reinsurance companies usually settle claims promptly, unlike SBC, which frequently delays payments.

Insurance Development and Regulatory Authority (IDRA) stated that one of the main reasons cited by companies for non-settlement is that SBC, the state-owned reinsurer, fails to settle its share of claims on time. 

As a result, insurers are unable to clear a significant portion of claims themselves. IDRA has already informed SBC about the issue. The new leadership at SBC is now working to reduce this gap, said the insurance regulator.

In the first quarter of 2025 (January to March), Reliance Insurance recorded an 18.89% year-on-year profit growth compared to the same period in 2024. This increase in profit was mainly driven by higher premium income and increased returns from investments.

In this quarter, its earnings per share stood at Tk2.27, which was Tk1.96 in the same period of the previous year.

On the other hand, Desh General Insurance Company reported that its profit decreased by 79% in the January to March quarter compared to the same period last year. In this quarter, its earnings per share stood at Tk0.05, which was Tk0.24 in the same period of the previous year.