Non-life insurers bear the brunt of global economic crisis
Profits of ten, out of 25 non-life insurers which posted earnings, have shrunk
The country's insurance sector has taken a hit from the ongoing global economic slowdown caused by the Covid-19 pandemic and exacerbated by the Russia-Ukraine war.
In the July to September quarter, the overall general insurance business suffered around 20% decline owing to a drop in opening letters of credit (LCs) and reinsurances, stock market volatility and excessive commission to their agents, said market insiders.
Usually, general insurers provide services to their clients in fire, marine, engineering, motor, and miscellaneous areas.
According to industry insiders, as Covid eased, the insurance business bounced back and the stock market also achieved impressive growth.
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But the prolonged Ukraine war, global economic instability, and the red-hot inflation have affected insurers' business along with other sectors, they added.
Twenty-five non-life insurers have so far disclosed their performances for the July to September quarter of 2022, and the earnings of around half of them have shrunk.
The earnings per share (EPS) of United Insurance Company dropped by 132% due to higher reinsurance premiums, claims, and unrealised loss from share investment despite a 7% increase in its gross premium.
The total comprehensive loss of the company was Tk6.43 crore, compared to Tk39.37 crore profit in the same period of 2021.
Khawja Manzer Nadeem, chief executive officer of United Insurance, told The Business Standard, "The marine insurance business, which covers the majority of non-life insurances, has approximately dropped by 30 to 40% during the period."
"We have cleared a big portion of clients' claims which has affected the company's net profit also," he added.
The EPS of Provati Insurance Company plummeted by a staggering 129% to Tk0.33 negative from Tk1.12 in the same period of 2021.
Company Secretary Mohammed Serajul Islam said the company has fared well in its core business but its returns from the capital market investment fell drastically in the third quarter.
The company had earlier received a healthy return from its stock investments, he added.
The overall non-life insurance business has dropped by 20% in the three months through September, said Saifuddin Ahmed, company secretary of Bangladesh General Insurance Company Ltd.
He said many companies tried to capture business by providing excessive agency commissions which have affected their operating income.
Seeking anonymity, an official of Peoples Insurance said the core business of insurance companies with banks has declined due to a drop in LC opening amid a dollar crisis.
The EPS of Peoples Insurance dropped by 26% in the July to September period.
Defying the gloomy picture, some non-life insurers have posted impressive earnings growth. Meghna Insurance posted 167%, Global Insurance 147%, Sonar Bangla Insurance 133%, and Federal Insurance 85% growth in earnings in the July to September quarter this year.
Currently, there are 79 insurance companies – 33 life and 46 non-life – in the insurance sector of Bangladesh. Of them, 55 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.
