Bangladesh:Insurer embroiled in commission row with airline

Two state owned entities---the Biman Bangladesh Airlines and the Sadharan Bima Corporation (SBC)--- are engaged in a dispute over the sharing of commissions received from reinsurers, officials say.

The national flag carrier claims that as the insured, 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 an insurance broker nor an agent, reported The Financial Express.

The problem surfaced, as the SBC, for the first time, did not pay any portion of the reinsurance commission to the Biman in the fiscal year ended 30 June 2020. Previously, SBC was paying to the Biman around 55% of the commission it had been getting from foreign reinsurers. The Biman authority in a letter to the Ministry of Civil Aviation and Tourism requested the latter to take the proper steps, so that it could obtain up to 95% of the commission paid by reinsurers.

However, the SBC opposed the claim, and said it underwrote the insurance risk for the Biman and other state-owned enterprises in line with the insurance law. SBC bore a portion of the risk, and the rest was re-insured by foreign reinsurers. In this process, the SBC received the commission from foreign reinsurers according to 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. When the opinion of the Insurance Development and Regulatory Authority was sought in this regard, the regulator referred to the insurance law, and said the Biman lawfully could not demand any insurance commission since it was only the policyholder.

In the last two years, including the COVID-19 pandemic period, the aviation industry faced serious financial losses. The aviation reinsurers subsequently raised their rates and slashed their commission payments. Thus, the SBC could not pay any amount to the Biman in the 2019-20 fiscal year.

Source: Asia Insurance Review