POST TIME: 23 September, 2019 00:00 00 AM
Experts favour listing of quality insurance firms on bourses
‘Most non-listed insurance companies are of poor quality’

Experts favour listing of quality insurance firms on bourses

The condition of the country’s share market will definitely improve if qualified companies are listed, but a big problem here is that most of the insurance companies in the country are not good in quality, experts said.

“Insurance companies, to be listed in the stock market, have to be good in quality. Otherwise, it will not bring any fruitful outcome,” Dr Ahsan H Mansur, executive director of Policy Research Institute of Bangladesh and also chairman of Brac Bank, told The Independent.    

The finance minister, AHM Mustafa Kamal, recently said non-listed insurance companies would have to enter the capital market by December to further energise the bourses and the economy.

Mansur also said that insurance is a service-oriented business and investors should be cautious while making new investments in such companies. Hence, the government’s plan is to increase penetration of the insurance sector through some positive measures like digitisation, where risks are minimised.

Expressing his views, Mansur said, “It’s quite impossible for all the non-listed companies to enter the capital market within three months because it’s not easy for a company to be listed in such a short period of time. It takes 1 to 1.5 years for a company to be listed in the stock market because lots of procedures have to be scrutinised.”

The Securities and Exchange Commission (SEC) would look into a few things before a company enters the stock market but most of the insurance companies’ situations are bad and they are not in a good position at this moment, he said.

Future value calculation of an insurance company is difficult because the loss is incurred in the future and the difficult part of being an insurer is properly estimating what future insurance claims will be and setting premiums at a level that will cover these claims, as well as leaving an ample profit for shareholders, said Mansur.

Towfiqul Islam Khan, senior research fellow of the Centre for Policy Dialogue (CPD), told The Independent that every public and private entity should follow the corporate governance code to

protect stakeholders' interest as part of ensuring sustainable growth of the companies.

Insurance policy holders' confidence in the insurance sector would be increased if all the non-listed companies enter the capital market by December, which would also help raise the earnings of the stock investors, Sheikh Kabir Hossain, president of the Bangladesh Insurance Association (BIA), told The Independent.

“We hope the instruction (of the finance minister) would have positive impact on the entire insurance sector,” the BIA president said.

He said there are some 78 insurance companies in the country of which 47 companies are already listed and the remainderare non-listed. They would have to list themselves in the capital market.

The Securities and Exchange Commission (SEC) will form an audit by their own committee to scrutinise the companies when the process of listing starts, he further said.       

“These insurance companies were initially given a deadline for entering the capital market before they were awarded their licences. Unfortunately, however, they are yet to enter the capital market. The IDRA and BIA have assured us

that the non-listed insurance companies will enter the capital market,” he said.

Earlier, finance minister said if those companies fail to become cent percent complaint, then the licences of those non-listed companies would be initially suspended temporarily. He added that if those companies fail to rectify themselves, then there might be merger of companies, and if those companies fail to finally comply, then their licences would be scrapped permanently.

“The government preserves the right to nullify or cancel the licences, but I think everyone will comply with the decision,” he said, adding that the government and the BIA would work together to develop human capital in this sector.

Mentioning that the insurance sector is a strong area of the country’s economy, Kamal said

earlier there were misperceptions, propaganda and a crisis of confidence over this sector.

“But now, this sector has overcome all these obstacles,” he said, adding that the plan is there to further diversify this sector.

The finance minister also said a 15 per cent commission would be fixed for all those who would sell the insurance.

The chairman of the Insurance Development and Regulatory Authority Bangladesh (IDRA), Shafiqur Rahman Patwari, said various types of insurance services would be introduced to further enhance the penetration of this sector while a database would be developed highlighting the clients’ details and policy numbers.

The country’s insurance sector witnessed an overall investment of Tk. 36,935 crore in 2018 with a growth of 3.20 per cent.