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2/11/2018 Forex flies out as MNCs get insured abroad illicitly

Forex flies out as MNCs get insured abroad

SBC complains they ignore local insurers and thus also dodge paying govt revenue

Jasim Uddin Haroon and Syful Islam | Saturday, 13 January 2018

Many of the multinational companies (MNCs) in Bangladesh

allegedly get underwritten the risk coverage of their assets
from abroad on double deception: revenue evasion and
foreign-exchange siphoning.

Sources said such firms are bypassing local insurers to get

insured abroad in a flagrant violation of the insurance law of

This also implies that the local insurance firms and the tax
authority fail to derive resources form the large companies
who render services and the quality products to the local consumers, thus possessing major share of the

Such allegations came in a written statement to the insurance-regulatory authority in Bangladesh -- IDRA.

Some high-ups of the SBC (the non-life and only reinsurer in Bangladesh) also alleged that a number of
local non-life firms are involved in "fronting insurance" for some of the MNCs, again by bending the law of
the land.

Fronting insurance is a risk-management technique in which an insurer underwrites a policy to cover a

specific risk but then cedes the risk to a reinsurer. Under such situation, local firms get a small amount of
commission and the MNCs pay the rest of the amount abroad for reinsurance.

They also say that there are some MNCs who are involved fully in such type of fronting insurance.

Officials at the Sadharan Bima Corporation (SBC) argue that many of the renowned MNCs do not buy any
insurance coverage locally-they fully go global.

However, there are some MNCs who comply with all set rules in terms of underwriting risk coverage.

The written statement reads: as per section 19 of the Insurance Act 2010, none can insure any property
situated in Bangladesh outside the country without taking a certificate from the Insurance Development and
Regulatory Authority (IDRA) that the risk coverage cannot be done locally for lack of capacity and facility. 1/3
2/11/2018 Forex flies out as MNCs get insured abroad illicitly

Buying fire, marine, and miscellaneous insurance coverage is mandatory for companies having factories in

SBC managing director Syed Shahriyar Ahsan in a recent letter to the IDRA said taking insurance coverage
by MNCs for their assets and establishments abroad is "a total violation of the existing insurance act".

He also wrote that local insurance companies are being deprived of insurance premium due to buying risk
coverage abroad by MNCs.

Besides, the government is also losing a significant amount of money as revenue from the sector.

Mr Ahsan said the MNCs taking the advantage of 'blanket policy' bought in the headquarters to cover
insurance of their assets in Bangladesh.

"Moreover, hard-earned foreign currencies are being channeled abroad in the name of insurance abroad in
addition to head-office cost and yearly dividend," he noted in the complaint.

The SBC managing director in the letter requested for issuing directives to ensure that MNCs buy insurance
coverage from local insurers instead of foreign risk coverage.

Contacted over telephone, IDRA member Gokul Chandra Das told the FE the authority so far had not
received any application from any MNC for permission to buy foreign insurance coverage of their assets.

"I have no idea whether the MNCs buy insurance coverage from outside the country," he said.

Acknowledging having received a letter from SBC managing director in this regard, Mr Das said the
corporation did not specify the names of companies which buy insurance coverage locally or from abroad.

"The SBC has to provide specific information to get a solution in this regard," said the IDRA official.

In the meantime, there are only few non-life insurance firms involved with the MNCs, and the local Reliance
Insurance is among the leading ones.

Chief Executive Officer (CEO) of Reliance Insurance Ltd Khaled Mamun, however, differed with the
allegation raised by the SBC. He said MNCs are most compliant clients in insurance sector.

"Nearly 40 per cent business of my company comes from MNCs," he said, adding that the allegation of
country's deprivation of insurance premium from the multinational companies is not true.

"The MNCs are insuring their full properties who are in operation in Bangladesh with local insurance
companies. They definitely do it," said Mr Mamun, who had worked at the reinsurance department of SBC
for 11 years before joining Reliance Insurance.

"And we do 50 per cent re-insurance compulsorily through the SBC," he noted.

He pointed out that MNCs cannot keep their assets uninsured according to their corporate standards.

According to him several other private-sector insurance companies are also providing insurance coverage to
the MNCs.

Bangladesh has more than 200 MNCs in business from banking services to manufacturing different types of
goods. 2/3
2/11/2018 Forex flies out as MNCs get insured abroad illicitly

Editor : A.H.M Moazzem Hossain

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