Daily Sun 31 July 2012
The government has decided to give licences to new life insurance companies aiming to make the local insurance sector more competitive. Sources hinted that the government might issue licences to five new insurers, taking the number of the country’s insurance companies to 19.
The Banking Division of the Finance Ministry has finalised a guideline to allow new insurance companies in the country’s one of the key financial sectors, said a senior official of the Banking Division.
The official also informed Finance Minister AMA Muhith has already approved the guidelines, which would be sent to the Insurance Development Regularity Authority (IDRA) for making an announcement in this regard.
Chief executives of some of the existing life insurance companies, however, said no more insurance company is required in Bangladesh at this moment since the market is already oversaturated.
They also observed that at least three insurers among the existing ones are passing tough time in terms of their premium earnings and poor claim-settling capacity.
Applicants who have submitted applications earlier to set up new insurance companies would be required to submit their applications again to comply with the new guidelines, the sources confirmed.
Over 560 applications have been submitted so far following a finance ministry’s announcement regarding issuance of licence to new insurance companies and banks.
“IDRA will publish a fresh announcement soon, seeking applications to establish new insurance companies, as we have already finalised the guideline in this regard,” another senior official of the banking division said.
He also said the guideline has incorporated stringent terms and conditions to allow only the ‘capable ones’.
As per to the guideline, Tk 300 million will be required as paid-up capital to establish a new life insurance company while non-life insurance company will be required Tk 400 million as paid up capital under the Insurance Act 2010.
It also said 60 percent of the said Tk 300 million will have to be provided by the respective sponsors of the proposed companies. The companies will have to issue 40 percent public shares within three years from the commencement of their operation.
The minimum shareholding stake of each sponsor will be Tk 2.0 million for the life insurance companies and Tk 2.5 million for non life insurance companies while the maximum will be 10 percent of their respective total capital.
This ceiling of 10 percent applies to an individual company or family member, either personally, jointly or both family is defined herewith to include spouse, father, mother, son, daughter, brother, sister of the individual or any one dependent on that individual.
The ceiling will be relaxed in the case of an insurance company, set up as a joint venture with a foreign company.
If an individual or members of his/her family had been a loan defaulter with any bank or financial institution anytime during the past five years, s/he will not be eligible to apply as a sponsor of an insurance company.
The guideline said competence, integrity and qualifications of the sponsors for becoming the first directors of the proposed companies will be evaluated.
The would-be directors must fulfill the criterion of a ‘Fit and Proper Test’, and they must have management or business or professional experience for at least 10 years.
An individual awaiting verdict of any undisposed lawsuit in any court will not be eligible to apply, the guideline said.
It said a director or adviser of any insurance company, other than the proposed insurance company, will not be a director of the proposed company. The member of board of directors of a company will be restricted to 20 members, including two independent directors.
The maximum number of directors from a family will be restricted to two in case of the total shareholding of that family exceeds 5.0 per cent, and to one, if the total shareholding of the family is up to 5.0 percent.
Bangladesh Economy 
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