Harsh financial penalty awaits the country's non-listed insurance companies as the new insurance ordinance has stricter provision against failure to go public, official sources said.
The council of advisers last Sunday gave its approval to the Insurance Ordinance 2008, in which the amount of financial penalty has been multiplied for the insurers failing to issue initial public offerings (IPOs) within the stipulated timeframe, they mentioned.
The council also gave its nod to two other laws - Insurance Regulatory Authority (IRA) Ordinance 2008 and Insurance Corporation (amendment) Ordinance 2008 - in order to make the country's insurance industry vibrant and effective.
The ordinances will soon come into effect through gazette notifications after getting the President's consent, official sources said.
"According to the new provision, insurance companies will be charged Tk 500,000 as financial penalty for their failure to float IPOs within the set time limit," said an official.
In addition, the default insurance companies will have to pay fine at the rate of Tk 100,000 a day for their delay in the flotation of IPOs, the official mentioned.
The authorities are expected to issue the rules regarding the imposition of enhanced penalty with setting a fresh deadline for flotation of IPOs after the new insurance laws come into being, officials said.
The provision of heavy financial penalty has been incorporated into the new insurance law in order to compel the non-listed insurance companies to get listed on the country's bourses, they said.
A total of 60 insurance companies are now operating in the country under the private sector and some 19 of them - 12 general and seven life - are yet to go public, official said, adding that more than 35 insurers have already got listed on the country's stock exchanges.
Some insurance companies have already got permission from the Securities and Exchange Commissions (SEC) for flotation of IPO while some of the proposals await the approval of the country's capital market watchdog.
Under the existing rules, the private insurance companies require to mobilise at least 60 per cent of their required paid-up capital through IPOs, said an official.
The official, however, said the required paid-up capital of a general insurance company has been enhanced to Tk 400 million in the new ordinance from existing Tk 150 million while that of life insurer has been raised to Tk 300 million from Tk 75 million.
According to officials, although there are provisions for imposition of financial penalty against the insurance companies for their non-compliance with the IPO deadline, but the amount of penalty is too poor to serve the purpose.
Currently, the relevant insurance companies are paying fine at the rate of Tk 1,000 per day for their delay in the flotation of IPOs.
Due to the poor amount of penalty, the companies concerned have been buying time for going public even after the authorities attached condition of floating IPOs with the renewal of their operating licences.
Since 2004, the insurers concerned have been paying significant amount of penalty every year for the renewal of operating licences, especially for doing new business.
