Prime Islami Life Insurance Limited (PILIL) is under investigation for making risky investments totalling Tk 198.31 crore, bypassing the regulatory mandate to invest in government securities.
An investigation by the Insurance Development and Regulatory Authority (IDRA) has revealed that the company channelled these funds into questionable ventures, including Zero Coupon Bonds (10 per cent convertible), short-term investments along with BO account investment, and accounts with entities such as Banglalion and Sterling Group.
PILIL is now pursuing legal recourse to recover these funds.
The company also underinvested Tk 217 crore in government securities, raising further concerns about its financial practices.
According to the IDRA guidelines, insurance companies are required to invest 30 per cent of their paid-up capital in government securities.
However, the investigation reported that PILIL has underinvested the amount when compared to the target outlined in its latest financial statement.
Prime Islami Life Insurance's Tk 4.99 crore-worth investment in a Zero Coupon Bond issued by Banglalion in 2013 has become a significant concern, as highlighted by the investigation. The bond, which includes a 10 per cent convertible option, was supposed to begin redemption after three fiscal years.
However, as of 2023, the amount remains an outstanding balance even after all these years, raising serious doubts among the investors about the bond’s recoverability.
Despite these uncertainties, PILIL has not set aside provisions for potential losses, potentially leading to inflated asset valuation and profits. The insurer initiated an arbitration process back in October 2020, securing a favourable ruling from the Arbitral Tribunal.
Currently, the matter is under review by the High Court (case no 33/23), where hearings continue in PILIL's bid in investment recovery.
Dubious short-terms
Meanwhile, PILIL is facing grave concerns on another front over its short-term investment of Tk 178.32 crore in PFI Securities, reported as part of its financial statements for the year ending on December 31, 2023.
This investment, carried forward since 2018, lacks any form of formal written agreement, raising bright red flags about the legitimacy and recoverability of the funds.
The absences of documentation and the company’s failure to address potential risks have fuelled worries that PILIL’s financial statements may be overstating its assets. To recover the funds, the insurance company has filed two cases—No 109/2020 and 164/2020—against PFI Securities at the HC.
The ongoing legal proceedings are critical in determining the insurer’s actual financial health and the resolution of this substantial investment.
A satisfactory explanation
Sterling Group, however, has challenged Prime Islami Life Insurance's financial statements, particularly a Tk 15 crore short-term investment involving four of Sterling’s concerns.
The investment, outstanding since 2018, was made without a formal agreement, claims Sterling Group. This was also revealed in the IDRA investigation reporting.
As with PILIL’s other questionable investments, no provisions have been made to cover potential losses, raising concerns regarding its overstatement of assets and profits. In response, PILIL has filed multiple cases (No 318/2020, 319/2020, 320/2020, and 321/2020) at the High Court against Sterling Group to recover the funds.
The resolution of these ongoing legal proceedings will be crucial in determining the accuracy of the company’s financial disclosures.
IDRA spokesperson Jahangir Alam stated that PILIL has been summoned for a hearing regarding the findings. If the company fails to provide a satisfactory explanation, legal action will follow, with the final decision pending the outcome of the hearing.
