Bangladesh:Regulator to explore insurance plans covering bond default risk

The Insurance Development and Regulatory Authority (IDRA) is making a move to find appropriate insurance products to protect the interests of bond investors and cover the risks associated with fixed-income financial instruments approved by the securities regulator.

The Bangladesh Securities and Exchange Commission (BSEC) has approved a number of bonds, including perpetual bonds, and preference shares issued by corporate houses, reported The Financial Express.

"We have approved bonds worth BDT450bn ($5.3bn) over the last five years," a BSEC official said. Many non-governmental organisations (NGOs) have also raised funds through bond issuances. For instance, the BSEC has approved a fund worth BDT13.5bn for BRAC, a leading global non-government organisation.

But the bonds and such other types of instruments are considered unsecured, says the BSEC official. If the issuers were to default on the bonds, the investors would face financial losses.

The IRDA is scheduled to hold a virtual meeting to deliberate the issue with its key stakeholders today. IRDA chairman Dr M Mosharrof Hossain will preside over the meeting. The BSEC, the state-owned non-life insurer and reinsurer Shadharan Bima Corporation (SBC), and other stakeholders are expected to join the meeting.

Mr Syed Shahriyar Ahsan, managing director of SBC, said that an overseas reinsurance facility for such insurance would be needed,

Source: Asia Insurance Review

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