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Insurance cos amass a mountain of wealth

Miraj Shams with Sakhawat Hossain Sumon
05 Sep 2023 23:29:17 | Update: 06 Sep 2023 00:11:43
Insurance cos amass a mountain of wealth

Assets in the insurance sector increased 26.18 per cent to Tk 63,629.05 crore in the last five years till 2022. Of which, the growth rate of non-life insurance assets is much higher than that of life insurance. Non-life insurance company asset growth rate was 50.07 per cent and life insurance 18.77 per cent in the last five years.

According to an annual report of the Financial Institutions Division of the Ministry of Finance, the turnover of life and general insurance companies in the country’s private sector has increased by Tk 13,201.53 crore coupled with an increase in both investment and income in the last five years.

Due to the Covid-19 pandemic, people's interest in insurance has increased. But after the pandemic, risks in business have increased because of the economic crisis caused by Russia-Ukraine war. Hence, it is assumed that insurance premiums in both general and life insurance sectors have increased and in such a situation, insurance companies have expanded their activities.

Due to these factors, insurance companies have built a mountain of wealth from income against deposits and investments of customers' savings.

Kazim Uddin, chief executive officer of National Life Insurance, told the Business Post, “Paying principal claims would never reduce assets if the company's premiums continue to rise and management expenses remain within limits.”

“Life insurance company’s customer claims usually start after the policy expires (except for death claims and surrenders). As a result, if the policy tenure is 12 years, then for the first 12 years only the assets will increase, then after 12 years if the premium increases from the claim amount, then the assets will also increase according to the rate of increase of the premium,” he added.

Although, the insurance industry is establishing itself by making important contributions to provide financial security in the country’s business and commerce development along with taking steps to deal with the risk to people's lives and acquired resources. At present 35 life insurance and 46 non-life insurance companies are conducting business in the country. The Finance Ministry feels that the insurance sector has become more dynamic than before.

Although life insurance companies are fewer in number, the amount of assets is more when compared to the non-life insurance companies. At the end of 2022, the assets of life insurance companies stood at Tk 45,715.23 crore and the assets of non-life insurance companies at Tk 17,913.82 crore.

Currently, out of the total assets of Tk 63,629 crore in the insurance sector, five companies in the life insurance sector hold Tk 45,715 crore or 77 per cent of it and 10 other companies hold 90 per cent of the assets. Out of these assets, the assets of five companies amount to Tk 35,206 crore while the assets of those 10 companies are Tk 41,164 crore. The remaining 25 companies hold assets worth Tk 4,551 crore.

It is known that the multinational company Metlife is at the top in terms of assets. The company’s assets stand at around Tk 18,500 crore. The company’s investment amount in Bangladesh is Tk 17,000 crore.

National Life Insurance is second only to MetLife in terms of assets. As of 2022, the assets of this company are worth Tk 5,512.80 crore.

Third-placed Delta Insurance held assets of Tk 4,432 crore as of June 2019. Fareast Life Insurance, which is ranked fourth in terms of assets, had assets worth Tk 4,230 crore till the year 2020. As per the latest estimates till 2021, the state-owned Jibon Bima Corporation’s assets amount to Tk 2,530 crore, making it fifth in line.

Popular Life Insurance Company is in the sixth position as its assets stood at Tk 2,359 crore at the end of 2022. Meanwhile, Meghna Life Insurance, which is ranked seventh, held assets worth Tk 1,975 crore and Sandhani Life Insurance, which is ranked eighth, has assets of Tk 994 crore. Pragati Life Insurance at ninth position has assets worth Tk 315.70 crore and Padma Life Insurance at tenth position holds assets worth Tk 314.87 crore.

It is known that the combined assets of the private sector’s life and general insurance companies in 2018 were Tk 50,427.52 crore. This investment increased 5.60 per cent to Tk 53,249.32 crore in the following year. Compared to the previous year, the total assets increased by Tk 4,007.47 crore to Tk 57,256.79 crore in 2020 and in 2021, the total assets increased by Tk 4,313.43 crore to Tk 61,570.22 crore. According to the unaudited accounts, the amount of assets increased by Tk 2,055.83 crore or 3.34 per cent in 2022 compared to the previous year. The wealth growth rate last year was the lowest in the previous five years.

The assets of non-life insurance companies are growing rapidly. Total assets increased from Tk 11,936.71 crore in 2018 to Tk 17,913.82 crore in 2022. In the last five years, Tk 5,977.10 crore worth of assets has increased. However, in the last five years, assets of life insurance companies have increased from Tk 38,490.81 crore to Tk 45,715.23 crore. During this period the life insurance assets increased by Tk 7,224.42 crore.

Life and general insurance companies of the private sector collectively invested Tk 46,678.12 crore in 2022. In 2018, the investment amount was Tk 37,228.59 crore. So, the investment has increased by Tk 9,449.53 crore in a span of five years and the majority of this came from life insurance companies.

According to the Ministry's data, in 2022, insurance companies earned Tk 16,814.71 crore in premiums while it was Tk 12,416.47 crore in 2018. Premium income increased by Tk 4,398.24 crore.

Insurance Development & Regulatory Authority (IDRA) spokesperson and Director (deputy secretary) Jahangir Alam said, “The increase in assets is good news for the insurance sector. It can be assumed that our insurance companies are doing well.”

“However, if the assets increase according to good business ethics, it is good for the entire insurance sector,” he added.

Kazim Uddin of National Life Insurance said, “The amount of asset growth in 2020 to 2022 is Tk 4,909.71 crore, Tk 5298.32 crore and Tk 5512.76 crore, respectively. The growth rate is 7.92 per cent and 4.05 per cent, respectively.”

“At the same period in 2022, the amount of claim payment stood at Tk 1052.07 crore. The assets continue increasing due to the increase in the premium income of our company,” he added.

Zenith Islami Life’s Chief Executive Officer SM Nuruzzaman told The Business Post, “Any company's asset growth is good for that company. However, it has to be checked whether the company is increasing the assets after paying the customer claims or not. If not then I think this asset increase will not help the company.”

He also said, “The regulatory body has a set of regulations on how insurance companies can raise assets. In many cases, it may not be implemented because many companies do not pay insurance claims year after year but have immense assets.”

“As general insurance companies do not have to do business at the field level and with business firms as clients, they can easily raise their assets,” Nuruzzaman said while adding, “On the other hand, life insurance companies have to do business at field level and currently all insurance companies are losing business due to the ill repute of 8 to 10 companies. So, a company must have a reputation for paying insurance claims to its customers rather than just holding assets.”