The World Bank Bangladesh Insurance Sector Development Project (P156823) REPORT NO.: RES59080 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF BANGLADESH INSURANCE SECTOR DEVELOPMENT PROJECT APPROVED ON MARCH 20, 2017 TO PEOPLE'S REPUBLIC OF BANGLADESH FINANCE, COMPETITIVENESS AND INNOVATION SOUTH ASIA Regional Vice President: Martin Raiser Country Director: Abdoulaye Seck Regional Director: Mathew A. Verghis Practice Manager/Manager: Gabi George Afram Task Team Leader(s): Anzhela Prygozhyna The World Bank Bangladesh Insurance Sector Development Project (P156823) I. BASIC DATA Product Information Project ID Financing Instrument P156823 Investment Project Financing Original EA Category Current EA Category Not Required (C) Not Required (C) Approval Date Current Closing Date 20-Mar-2017 28-Feb-2024 Organizations Borrower Responsible Agency People's Republic of Bangladesh Insurance Development and Regulatory Authority (IDRA) Project Development Objective (PDO) Original PDO The project development objective is to strengthen the institutional capacity of the regulator and state-owned insurance corporations and increase the coverage of insurance in Bangladesh. Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IDA-59720 20-Mar-2017 10-Apr-2018 08-Jul-2018 28-Feb-2024 65.00 47.01 16.98 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No II. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES The World Bank Bangladesh Insurance Sector Development Project (P156823) The project is at final stage of implementation. Procurement and disbursement improved significantly after the previous project restructuring in August 2022, with full commitment of the project funds under the signed contracts, and disbursement of IDA credit increased from 20.8 percent in June 2022 to 73 percent in December 2023. The authorities have confirmed their commitment and have taken steps to accelerate regulatory and supervisory reforms in the insurance market, along with advancing institutional strengthening reforms of the four project beneficiaries. The project ratings are as follows: the overall project implementation is MS (October 2023 mission) but is expected to be upgraded with completion of the activities under the project, PDO rating is MS (due to delays with regulatory/supervisory reform), Procurement is MS, and Financial Management is MU due to recently identified irregularities which were discussed and addressed before the end of 2023 (the FM rating will be refreshed to reflect progress during the next mission in March-April 2024). The extension of the project closing date has been requested by the client (ERD Letter from October 25, 2023 received by the Bank on November 7, 2023) to support full implementation of the project supported regulatory and supervisory reforms and IT/MIS investments that have been delayed due to late project effectiveness, significant disruptions caused by the COVID pandemic and lockdowns during 2020-2022, as well as complexity and interconnectedness of reforms in the back of weak institutional capacity of the main beneficiary agencies. It is expected that with the proposed extension from February 28, 2024 to August 30, 2024 the client will complete all the key activities supported by BISDP, including regulatory and supervisory reform, and installation of core IT/MIS systems at IDRA, JBC, SBC and BIA, to meet the project's PDO and the results framework and set the right path for the continued development and more sustainable and inclusive growth of the insurance market in Bangladesh. The client has taken actions to accelerate project implementation in line with the agreed action plan of October 2023 mission. On January 8, 2024 IDRA has established the integrated interdepartmental task force for risk-based supervision (RBS) reform and is finalizing the road map for 5-year phased-in RBS implementation per Bank recommendations. The revised IDRA org chart and expanded staffing plan is under government review, with multiple reforms implemented by IDRA in various areas to boost products development and enhance market discipline. Corporate Governance Guidelines were issued and enforced on October 2023, with monitoring of implementation under way. As envisioned by the project, IDRA is finalizing six other regulatory reforms necessary to enhance solvency, reporting and disclosure, claims management and consumer protection in the insurance market. IDRA has already taken bold measures to sanction insurance companies that failed to meet clients' claims and is working on further strengthening its enforcement capacity. The pending procurement activities have either been finalized, with selection completed and contracts awarded (G42, contracts for international and local training consultants) or are at the final stage (selection documents for S10.1 and G43 are prepared/under WB review). The activities under all large IT/MIS contracts are being closely supervised and coordinated, with all the deadlines established prior to the proposed new project closing date to ensure timely implementation. The client has submitted the project audited financial statements on time before December 31, 2023, has prepared the response action and taken actions to address weaknesses identified in the financial management report. The client and the Bank are organizing monthly coordination and thematic technical meetings with the project beneficiaries and contractors to discuss progress and provide support as needed. III. DETAILED CHANGES LOAN CLOSING DATE(S) The World Bank Bangladesh Insurance Sector Development Project (P156823) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications IDA-59720 Effective 31-Aug-2022 28-Feb-2024 30-Aug-2024 30-Dec-2024