No Insurance, No Long Money

Executive Summary. Insurance does two economic jobs. It pays when a specified loss occurs, and it pools premiums that can be invested over long horizons. Bangladesh is weak at both ends of that bargain. Bangladesh Bank reports that gross insurance premium reached BDT 187.68 billion in 2024, up 2.97% from BDT 182.27 billion in 2023. Total assets reached BDT 690.9 billion. Yet premiums fell from 0.44% of GDP in 2020 to 0.36% in 2024, while insurance assets fell from 1.77% of GDP to 1.32%. Absolute balances grew, but the economy grew faster. Trust indicators also weakened. The life-insurance claims settlement ratio fell from 72.43% in 2023 to 66.27% in 2024; the non-life ratio fell from 41.35% to 33.74%. This essay is not another stock-market-turnover argument. It identifies the institutional investor that never became large enough. Life insurers invested BDT 403.04 billion in 2024, and 63.09% of their portfolio was in government bonds. If households do not trust claims and premiums remain thin, Bangladesh loses both risk protection and a natural pool of long-duration finance.

The pool grew in taka and shrank in the economy

Insurance assets can rise every year and still become less important. Bangladesh Bank's series shows the sector's assets at 1.77% of GDP in 2020, falling to 1.32% in 2024. Premium penetration moved from 0.44% to 0.36% over the same period.

Source: Bangladesh Bank Financial Stability Report 2024, Appendix LXVII.

This is the central measurement. Gross premium reached BDT 187.68 billion in 2024, and total assets reached BDT 690.9 billion. Those are real balances. The penetration ratios show that the balances did not keep pace with national income. A growing nominal pool is not the same thing as a deepening institution.

The distinction matters for long-term finance. An insurer collects premiums now and expects some claims later. A life insurer, in particular, can hold assets with longer maturities than a bank funded by withdrawable deposits, provided liabilities are measured honestly and claims are paid. That liability structure makes insurance a natural buyer of long-duration bonds and infrastructure instruments.

Bangladesh's pool remains too small relative to the economy to play that role at scale. This does not prove that every infrastructure project lacks finance because insurance is thin. It identifies one missing balance-sheet class. When insurers, pensions, and other contractual savings institutions are shallow, long projects depend more heavily on banks, budgets, or external borrowing.

The Financial Stability Report notes that its insurance analysis uses unaudited statements supplied by the regulator. That caveat is material. It means the values are the official system view but not a substitute for audited, company-level solvency and liability data. A long-money strategy cannot be built on asset totals alone.

The investment capacity exists but does not compound fast enough

Life-insurance investment rose from BDT 366.66 billion in 2020 to BDT 403.04 billion in 2024. Non-life investment rose from BDT 68.39 billion to BDT 119.44 billion. In 2024, life insurers held BDT 485.6 billion in assets and non-life insurers BDT 205.3 billion.

Source: Bangladesh Bank Financial Stability Report 2024, Appendix LXVI and Chapter 9.

These balances show that insurance is already an investor, not merely a claims administrator. Life-insurance investment equaled 83% of life assets, while non-life investment equaled 58.18% of non-life assets. The question is what the portfolios finance and whether the liabilities behind them are sound.

Bangladesh Bank reports that 63.09% of life-insurance investment was in government bonds. That allocation is understandable. Government securities can match longer liabilities, provide regular income, and avoid some project-specific risk. It also means that a deeper insurance sector could strengthen the domestic long-bond market.

But asset allocation cannot solve weak liability confidence. If policyholders doubt that valid claims will be settled, premium growth stalls. If liabilities are understated or assets overstated, apparent long money is not patient capital at all. It is a future claim on missing cash.

This is why calls to direct insurers toward infrastructure are premature unless solvency, valuation, governance, and claims performance are credible. A quota can move portfolio labels without creating risk-bearing capacity. Long money is produced by trusted long liabilities, not by an administrative instruction to buy long assets.

Claims are the trust engine

The claims settlement series moved sharply in the wrong direction. Life insurers settled 72.43% of claims in 2023 and 66.27% in 2024. Non-life insurers moved from 41.35% to 33.74%.

Source: Bangladesh Bank Financial Stability Report 2024, Tables 9.1 and 9.2.

These are sector ratios, not evidence that every unpaid claim was valid or overdue. Claims can be disputed, incomplete, fraudulent, or pending. The report's definition is the share of claims settled during the year out of total claims. A sound regulator should publish more detail on age, cause, product, and company.

Even with that caveat, the ratios go to the heart of the product. Insurance sells a promise whose quality becomes visible after a loss. A bank depositor can see a balance. A policyholder often discovers the value of coverage only when filing a claim. Delay, opacity, or rejection therefore damages demand across the entire market, including well-run insurers.

The feedback loop is destructive. Weak claims confidence suppresses premium participation. Thin premiums keep the investment pool small. A small pool raises operating costs relative to business volume and limits product diversification. Weak firms then have more incentive to delay payment. Long-term finance disappears because the short-term promise was not trusted.

Restoring claims performance is therefore capital-market policy as well as consumer protection. Every additional reliable long-term policy creates a liability that can support long-duration assets. Every unresolved claim teaches households to keep savings outside the contractual pool.

Long money requires liability discipline

Bangladesh needs longer-maturity finance for infrastructure, housing, technology, and business expansion. The usual response is to invent a fund. Funds do not create duration by themselves. Someone must willingly hold a long claim, and the institution issuing it must remain solvent and trusted.

Insurance can provide that duration because risk pooling gives it predictable cash-flow patterns across many policyholders. But the institution must price risk, reserve against liabilities, invest prudently, and settle claims. If any link is weak, the asset pool becomes unstable or fictitious.

Regulation should therefore start with liability quality. Common definitions, audited statements, market-consistent asset valuation, actuarial review, related-party limits, and public claims aging are not back-office reforms. They determine whether BDT 690.9 billion represents deployable capital or a balance against uncertain obligations.

Competition also needs a trust floor. Consumers cannot easily evaluate an insurer's future willingness to pay. Marketing can outrun solvency information. A regulator must make weak performance visible and intervene before unpaid claims accumulate. Otherwise careful firms pay a reputation tax created by careless ones.

Once that foundation exists, portfolio reform can widen the supply of suitable assets. Insurers need transparent government yield curves, investment-grade corporate bonds, standardized infrastructure securities, custody, and reliable disclosure. The purpose is choice, not compulsion. A solvent insurer should be able to match liabilities across several long assets without being used as captive financing.

What would change this conclusion

The conclusion would change if premium and asset ratios stopped falling from the current 0.36% and 1.32% of GDP, claims settlement improved from 66.27% in life and 33.74% in non-life, and audited data showed liabilities fully backed by quality assets. Nominal asset growth alone would not change it.

Three moves would test whether insurance can become long money.

1. Publish claims aging and reasons by insurer. Separate settled, pending, disputed, rejected, and overdue claims under a common definition. Owner: Insurance Development and Regulatory Authority. Success signal: the sector can explain and reverse the decline from 72.43% to 66.27% in life and from 41.35% to 33.74% in non-life.
2. Require audited liability and asset-quality disclosure before directing portfolios. Standardize actuarial reserves, related-party exposures, valuation, and solvency intervention. Owner: Insurance Development and Regulatory Authority with audit oversight bodies. Success signal: the reported BDT 690.9 billion asset pool is reconciled to credible liabilities and liquid asset quality.
3. Build investable long assets through disclosure, not quotas. Develop standardized bond documentation, project cash-flow reporting, custody, and secondary-market transparency. Owner: Ministry of Finance, securities regulator, and Bangladesh Bank. Success signal: life insurers can diversify the BDT 403.04 billion investment pool while matching liabilities and paying claims.

The counterargument

The strongest objection is that insurance is too small to matter for national investment and should focus only on protecting policyholders. Banks and public finance will remain the primary channels, while directing attention to institutional investors may distract from urgent claims failures.

The premise is partly right. At 1.32% of GDP, insurance assets cannot transform long-term finance alone. Protection must come before portfolio ambition. The argument is that these are sequential parts of the same institution, not competing agendas. Reliable claims create trusted liabilities. Trusted liabilities create a larger pool. A larger, well-regulated pool can hold longer assets.

Another objection is that government bonds already absorb 63.09% of life-insurance investment, so expansion may simply finance the budget. That risk is real. It is why asset-market reform must offer transparent alternatives and why solvency rules must prevent political direction from replacing fiduciary judgment.

Bangladesh does not need insurers to become development banks. It needs them to become dependable insurers. If they do, long money follows from the product's own balance sheet. If they do not, no allocation rule can manufacture patience from a promise households do not trust.

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Data sources: Bangladesh Bank Financial Stability Report and IMF Bangladesh Article IV material, retrieved on the publication date. Bangladesh Bank states that the insurance analysis uses unaudited company statements supplied by IDRA. The IMF source informs the macro-financial context; no IMF numerical claim is used.

Sources

1. Bangladesh Bank, Financial Stability Report 2024: https://www.bb.org.bd/pub/annual/fsr/financial%20stability%20report%202024.pdf
2. International Monetary Fund, Bangladesh Article IV Consultation country report: https://www.imf.org/-/media/files/publications/cr/2026/english/1bgdea2026001-source-pdf.pdf