Businesses show heightened interest in sabotage and terrorism insurance

Businesspeople in Bangladesh are becoming increasingly interested in sabotage and terrorism insurance following incidents of arson, looting and vandalism at several industrial establishments across the country, according to various insurers.

Sabotage and terrorism insurance provides coverage against financial losses resulting from politically motivated violence as well as acts of terrorism or sabotage.

A number of factories, such as the Gazi Tyres unit in Rupganj upazila of Narayanganj, have come under repeated attack since the Awami League government was ousted by a mass uprising on August 5, with many claiming that such episodes are politically motivated.

The insurers said that as the country has never faced this kind of situation, businesspeople were uninterested in sabotage and terrorism insurance in the past.

An official of the Bangladesh Insurance Association (BIA) informed that all of the industrial units damaged so far were only covered by fire insurance.

So, when the primary insurers issued claims to their reinsurance providers, it turned out that they were not entitled to the full benefit because fire insurance does not cover acts of sabotage or terrorism.

Reinsurance refers to insurance purchased by primary insurers from another insurance company to transfer some of the insured risk to the reinsurer, according to Investopedia.

AKM Monirul Hoque, chairman of Nitol Insurance Company Limited, said the recent incidents have led to a surge in interest in sabotage and terrorism insurance.

“Unlike before, many businesspeople are now inquiring about this product,” he said.

Hoque also said they have asked reinsurers to at least pay some compensation against their claims considering the current situation.

“Although both primary insurers and reinsurers are looking to do business at the end of the day, I will try to pay as much of the claims as possible from my end,” he added.

Repeated acts of violence at numerous factories since early last month have created deep concerns among entrepreneurs and cast the livelihoods of thousands of workers at these units into uncertainty.

As of August 27, incidents of arson, looting and vandalism were reported at nearly three dozen industrial units across the country, according to reports by correspondents of The Daily Star.

Most of the targeted establishments are owned by people who are politically affiliated with the former government, which saw its 15-year reign ended when Sheikh Hasina resigned from her post as prime minister before fleeing the country on August 5.

The rampant acts of violence, facilitated by a complete breakdown of law and order following the mass uprising, were termed unprecedented by business leaders.

Hasan Tarek, chief executive officer of Continental Insurance Limited, said their field officers have been getting many inquiries from businesspeople.

Citing how the recent violence has created concerns about such incidents occurring in the future, he said it is a good thing that businesspeople are now thinking about mitigating such risks through insurance.

Khaled Mamun, chief executive officer of Reliance Insurance Limited, said several companies had expressed interest in buying sabotage and terrorism insurance ahead of August 5.

“But it was not right to seek insurance only after realising what lay ahead,” he said, adding that the interest in sabotage and terrorism insurance had waned since August 15.

Furthermore, Mamun said businesspeople should be aware of potential risks in order to secure the right insurance on time.

“Besides, many businesspeople think buying insurance means they are just giving away money for nothing in return. But that is not the case,” he added.

Nitol Insurance’s Hoque, who is also vice president of the BIA, said they are working on deciding what the premium rate for sabotage and terrorism insurance should be.

“Hopefully, we will be able to fix it within the next couple of weeks,” he added.