Five new life insurers to get permission
Saturday, 12 March 2011
Syful Islam
The government is likely to give permission to five more insurance companies, out of 350 applications that have been lying with ministry of finance (MoF) for clearance and approval, to start operation by the end of this calendar year, official sources said. "Finance Minister AMA Muhith has instructed the concerned officials of the ministry to take preparation for giving permission to five more life insurance companies by this year," a top official of the ministry told the FE Thursday. No applications for general insurance companies will be considered this time, he said. A total of 60 private insurance companies, including a foreign company, are now operating in Bangladesh. Of them, 18 are life insurance, and 42 are the general insurance, companies. Besides, two state-owned entities -- Jiban Bima Corporation (JBC) and Sadharan Bima Corporation (SBC) -- are also operating in life and insurance business respectively. MoF sources said a large number of applications, seeking permission to open new insurance companies, have been submitted to the ministry since the present government took office. The MoF in March 2010 had directed the now-defunct department of insurance to give permission to two new life insurance companies. Sources said this time the MoF would not give permission too liberally for opening new insurance companies. Ten to fifteen people close to the power-that-be, who already submitted applications individually, will be asked to form a company and come with fresh applications for permission. An official of the ministry said many individuals have been applying for permission since insurance business has been found to be more profitable than banking or other businesses. He said the insurance sector registered a considerable growth during the last couple of years. The companies in the sector earned a good profit even during the global economic recession, he said. Some 44 insurance companies are registered with the stock exchanges. "The main reason for a large number of applications for launching new insurance companies is the high prices of shares of insurance companies in the stock market, compared to those of banks or other financial institutions," the official said. "Investment by the insurance companies increased 10 to 150 times within a few years. That's why many people are in a rush to get permission for new insurance companies," he added. During the period between 1996 and 2001, the government gave permission to 30 insurance companies of which the majority were in general insurance business. At present, 62 insurance companies have given coverage to 7.5 million policy-holders, who constitute about 5.0 per cent of the country's population. In India, the insurance coverage is 35 per cent, in Pakistan, 28 per cent and in Sri Lanka, 26 per cent. Former chairman of Bangladesh Insurance Association (BIA) AKM Rafiqul Islam told the FE Friday that there was scope for giving permission to some more life insurance companies but not in general insurance sector. The number of general insurance companies is already high, he said. "Life insurance companies are doing well. The scope for business expansion for them is still wide since the country's population is continuing to increase," he said. Mr Islam said the country's insurance sector witnessed a growth of about 30 per cent last fiscal which in China was 34 per cent and in India 32 per cent. The government last year passed the Insurance Bill 2010 and the Insurance Development and Regulatory Authority Bill 2010, replacing the decades-old Insurance Act 1938 to better regulate the sector and protect customers' interest. The Insurance Regulatory Authority has started working recently.
The government is likely to give permission to five more insurance companies, out of 350 applications that have been lying with ministry of finance (MoF) for clearance and approval, to start operation by the end of this calendar year, official sources said. "Finance Minister AMA Muhith has instructed the concerned officials of the ministry to take preparation for giving permission to five more life insurance companies by this year," a top official of the ministry told the FE Thursday. No applications for general insurance companies will be considered this time, he said. A total of 60 private insurance companies, including a foreign company, are now operating in Bangladesh. Of them, 18 are life insurance, and 42 are the general insurance, companies. Besides, two state-owned entities -- Jiban Bima Corporation (JBC) and Sadharan Bima Corporation (SBC) -- are also operating in life and insurance business respectively. MoF sources said a large number of applications, seeking permission to open new insurance companies, have been submitted to the ministry since the present government took office. The MoF in March 2010 had directed the now-defunct department of insurance to give permission to two new life insurance companies. Sources said this time the MoF would not give permission too liberally for opening new insurance companies. Ten to fifteen people close to the power-that-be, who already submitted applications individually, will be asked to form a company and come with fresh applications for permission. An official of the ministry said many individuals have been applying for permission since insurance business has been found to be more profitable than banking or other businesses. He said the insurance sector registered a considerable growth during the last couple of years. The companies in the sector earned a good profit even during the global economic recession, he said. Some 44 insurance companies are registered with the stock exchanges. "The main reason for a large number of applications for launching new insurance companies is the high prices of shares of insurance companies in the stock market, compared to those of banks or other financial institutions," the official said. "Investment by the insurance companies increased 10 to 150 times within a few years. That's why many people are in a rush to get permission for new insurance companies," he added. During the period between 1996 and 2001, the government gave permission to 30 insurance companies of which the majority were in general insurance business. At present, 62 insurance companies have given coverage to 7.5 million policy-holders, who constitute about 5.0 per cent of the country's population. In India, the insurance coverage is 35 per cent, in Pakistan, 28 per cent and in Sri Lanka, 26 per cent. Former chairman of Bangladesh Insurance Association (BIA) AKM Rafiqul Islam told the FE Friday that there was scope for giving permission to some more life insurance companies but not in general insurance sector. The number of general insurance companies is already high, he said. "Life insurance companies are doing well. The scope for business expansion for them is still wide since the country's population is continuing to increase," he said. Mr Islam said the country's insurance sector witnessed a growth of about 30 per cent last fiscal which in China was 34 per cent and in India 32 per cent. The government last year passed the Insurance Bill 2010 and the Insurance Development and Regulatory Authority Bill 2010, replacing the decades-old Insurance Act 1938 to better regulate the sector and protect customers' interest. The Insurance Regulatory Authority has started working recently.