BIA to submit proposal to SEC

Ismail Hossain Life insurance companies in the country are going to submit a proposal to Securities and Exchange Commission (SEC) within one or two days for facilitating investment of around Tk 40 billion life funds in the stock market. "Our proposal is final and we will submit it tomorrow (Wednesday) or day after tomorrow (Thursday)," BIA chairman Sheikh Kabir Hossain told the FE on Tuesday. The insurance sector's apex body, Bangladesh Insurance Association (BIA) initiated a move last month to facilitate investment of 30 per cent of total life insurance fund in the country's stock market. Sheikh Kabir Hossain said the proposal includes at least 10 per cent quota in the Initial Public Offerings (IPOs) to ensure safety and security of policy holders' money, to allow opening merchant bank branch by insurers like bank and also allow insurance companies to set up asset management company to manage their invested money in the stock market. The country's 17 private life insurance companies accumulated huge fund over past decades, but most part of the same have been invested in fixed deposit receipts (FDRs) in the banking system. He said, "We have some Tk 200 billion life fund of which 30 percent money would be invested in the stock market." The BIA chairman said there are 10 life insurance companies are enlisted to the Dhaka Stock Exchange (DSE) out of total 17 and they have already invested about five per cent of life fund in the stock market. "So now the invest-possible money is not more than Tk 40 billion" he said. Sheikh Kabir Hossain said the association will also propose to find a way by stock regulator to invest other seven life insurance companies who are yet to be enlisted in country's stock market. BIA formed a three-member committee of finalising the task to make a proposal in this effect last month. Ahsanul Islam Titu, managing director of Sandhani Life Insurance Co Ltd, was made convenor of the committee who is also senior vice-president of DSE. The other members of the committee are managing director of Progressive Life Insurance Co Ltd MA Karim and vice-chairman of Karnaphuli Insurance Co Ltd Nasir Uddin Ahmed Pavel. Ahsanul Islam Titu said the committee has prepared the proposal. Life insurers have sought the government's policy support to their plan to invest Tk 100 billion fund in state-initiated infrastructure projects under the Public Private Partnership (PPP) concept. The country's 17 private life insurance companies have accumulated the fund over past decades, but most part of the same have been invested in fixed deposit receipts (FDRs) in the banking system. But shrinking returns from the banks and a double-digit inflation in recent years have prompted the insurers to look for more lucrative and solid areas of investment such as infrastructure projects. "We have urged the finance minister to take steps so that we can invest the Life Fund in PPP projects. It will benefit both the firms and the government," said BIA president Sheikh Kabir Hossain. Hossain told the FE the size of the Life Fund built up by the private insurers crossed Tk 100 billion in 2010 and is set to double in the next five years thanks to an average 20 per cent annual growth in the life insurance industry. "The fund is growing every year. It can be a big source of capital for large-scale development projects. The government can cut borrowing from global lenders if they decide to judiciously use our fund," he said. In India and most of the developed nations where interest payments from banks is very low, insurers invest Life Fund extensively in large bridge, road and hydroelectricity projects and power plants to secure better returns. Mr Hossain said the secretary of the Bank and Financial Institutions Division assured the insurers of taking necessary steps. The division is seeking Securities and Exchange Commission (SEC)'s opinion in this regard. The country's 43 private non-life and 17 life insurance companies earned Tk 14 billion and Tk60 billion as premium last year. The BIA said the insurers have invested over Tk100 billion in the country's economy.