BSEC urges 26 insurers to get listed on bourses

The Bangladesh Securities and Exchange Commission (BSEC) has urged 26 insurance companies to take initiatives for getting listed in the capital market promptly.

The securities regulator has recently sent a letter to the Bangladesh Insurance Association (BIA) in this regard.

The letter, signed by BSEC Chairman Professor Shibli Rubayat-Ul-Islam, said the government gave a facility to the 26 companies hoping that it would contribute significantly in bringing these companies to the capital market, but the progress in this regard is not as expected.

Sources at the BIA said they already issued letters to the insurance companies in this regard.

As per the securities rules, companies can apply for listing to raise at least Tk30 crore by issuing shares.

On 30 November last year, the BSEC exempted the insurance companies from this rule to enable them to get listed on the stock market under the fixed price method.

Under the new facility, the insurance companies will be able to apply to the commission for IPO aiming to raise less than Tk30 crore, but they have to raise at least Tk15 crore by offloading shares.

The commission stipulated that 26 insurance companies, which have less than Tk30 crore paid-up capital, must invest at least 20% of their equity in the capital market if they want to get listed.

The BSEC took the decision in response to an application by the Insurance Development and Regulatory Authority (IDRA) of Bangladesh in this regard.

The BSEC chairman alleged that the insurance companies are dilly-dallying to come into the capital market because they do not want to comply with rules.  

According to insurance rules, the sponsors and directors must jointly hold at least 60% shares of the paid-up capital of every company, but some of those companies do not comply with this rule.

Since introducing the new facility, only the Union Insurance Company Ltd has applied to the commission to raise Tk19.36 crore capital by issuing 1.93 crore ordinary shares in the capital market.

The company aims to invest in fixed deposit receipt (FDR) in the capital market and purchase floor space.

Besides, the Best Life Insurance wants to raise Tk15 crore from the stock market to strengthen its business. The company has already signed an agreement with the Prime Bank Investment for issue management services.

Meanwhile, SM Nuruzzaman, chief executive officer of Zenith Islami Life Insurance Ltd, said the company was not able to implement its plan regarding listing in the capital market due to the Covid-19 pandemic.

Previously, Finance Minister AHM Mustafa Kamal said all insurance companies in the country would have to be listed on the stock exchanges by the end of 2019.

He threatened to cancel the licences of the companies that failed to comply with the directive.

Currently, there are 78 insurance companies – 32 life and 46 non-life – in the insurance sector of Bangladesh. Of them, 49 companies are listed on the stock exchanges.  

Experts have been saying for a long time that Bangladesh is one of the most untapped insurance markets in terms of penetration rate.

Awareness and a strong culture of insurance service behind economic activities can help the industry thrive.

According to the Swiss Re Group, a leading global reinsurer, shows that the overall insurance penetration in Bangladesh stood at a meagre 0.49% in 2019 – the lowest among emerging Asian countries.

The penetration rate is measured as the ratio of premium underwritten in a particular year to the GDP.

Insurance penetration was 4.99% in Thailand in 2019, followed by 4.72% in Malaysia, 4.30% in China, 3.76% in India, 2.24% in Vietnam, 1.99% in Indonesia, 1.72% in the Philippines, and 1.25% in Sri Lanka.

Taiwan has the highest insurance penetration rate of 19.97% and Hong Kong 19.74%.