Overview of Non-Life Insurance Sector

October 17, 2019

Table of Contents
Background ................................................................................................................................................... 2
Non-life Insurance Sector of Bangladesh .................................................................................................... 2
Bottlenecks of Non-Life Insurance Sector ............................................................................................... 3
Regulatory Environment .......................................................................................................................... 4
Recent Developments .............................................................................................................................. 5
Project with World Bank .......................................................................................................................... 6
Impact of recent developments............................................................................................................... 6
Growth Prospects and Growth Drivers of Non-Life Insurance Sector ........................................................ 7
Economic expansion................................................................................................................................. 7
Import growth .......................................................................................................................................... 8
Infrastructure Development .................................................................................................................... 8
Private Sector Credit ................................................................................................................................ 9
Demographic Dividend ............................................................................................................................. 9
Regulatory reform .................................................................................................................................. 10
Risk Factor .............................................................................................................................................. 10
Selected Data of Listed Non-Life Insurance Companies (as on December 2018) .................................... 12
Selected Ratios of Listed Non-Life Insurance Companies Based on Financial Statements 2018............. 13
Annexure1 .................................................................................................................................................. 14
 Overview of Non-Life Insurance Sector of Bangladesh Date: October 17, 2019

Background
Necessity of a vibrant insurance sector is manifold. Robust and Insurance Penetration Ratio
vibrant insurance sector plays a key role to keep an economy
Total Gross Premium (BDT mn)' GP/ GDP
resilient to the financial shock through providing appropriate risk
140,000 1.0%
transferring mechanism. Apart from this, insurance sector is the
120,000
supplier of big chunk of investable funds in an economy by 0.8%
100,000
exploiting the benefit of its contingent nature of liability in lieu of
80,000 0.6%
on demand nature. Unfortunately, neither insurance sector of
Bangladesh is as mature as other conduits of financial system of 60,000 0.4%
the country, nor it is in line with our national output growth. For 40,000
0.2%
instance, five year CAGR of our nominal GDP is 13.4%, at the 20,000
same time horizon CAGR of Gross Premium of this sector is only 0 0.0%
6.88%. It indicates lower penetration of the insurance sector. In 2011 2012 2013 2014 2015 2016 2017 2018
addition to this Bangladesh is one of the most underinsured Source: Bangladesh Insurance Association, Bangladesh Economic
countries of the world. As of 2018 insurance penetration ratio of Review 2019

Bangladesh is 0.55% which is lowest in Southeast Asia1. This

Quick Facts
under penetration may be characterized by the lack of
appropriate insurance product, back-dated and erratic insurance  As on 2018 Gross Premium of insurance industry
business model, lack of policy support from the government and is BDT 124,170 million
above all lack of good corporate governance in the insurance  Gross Premium of Life Insurance Sector is BDT
sector. Unparalleled growth opportunity is lying in this sector 90,200 million
considering its underinsured economy, robust economic  Gross Premium of Non-Life Insurance sector is
expansion, expected fourth industrial revolution, young BDT 33,970 million
population driven demography. Recent initiatives from major
stakeholders raised the hope of realization of this growth.

Non-life Insurance Sector of Bangladesh

History of insurance business of Bangladesh is rooted back to a century. However, immediately after the liberation
of Bangladesh, insurance companies were nationalized along with the banks under the presidential order no. 95 in
1972. This order was implemented through creation of five corporations which were further changed through

Gross Premium Growth of Non-Life Insurance Gross Premium Growth of Life Insurance
Gross Premium Non-life (BDT mn) Gross PremiumLife (BDT mn) Growth
Growth
40,000 15% 100,000 20.0%

32,000 12% 80,000

10.0%
24,000 9% 60,000
0.0%
16,000 6% 40,000

8,000 3% -10.0%
20,000
0 0%
0 -20.0%
2012 2013 2014 2015 2016 2017 2018
2012 2013 2014 2015 2016 2017 2018
Source: Bangladesh Insurance Association

1
https://databd.co/wp-content/uploads/2019/07/potential-for-growth.pdf
https://www.thedailystar.net/business/news/bangladesh-most-underinsured-nation-1674145

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 Overview of Non-Life Insurance Sector of Bangladesh Date: October 17, 2019

merging these five corporations into two corporations namely Sadharan Bima Corporation- for conducting general
insurance business and Jiban Bima Corporation- for conducting life insurance business. Privatization of Insurance
Sector took place in 1984 as a result of promulgation of Insurance Corporation Ordinance 1984. Currently there are
78 insurance companies including two previously mentioned government owned corporations. Among these, 47 are
non-life insurance companies and 31 are life insurance companies. 35 non-life and 12 life insurance companies are
listed in the capital market. However, Insurance sector is still undergrown considering the age of privatization and
comparing with other constituents of financial sector. Insurance products fall in negative demand category that
means people are reluctant to buy an insurance policy unless there are any regulatory bindings or there is extreme
necessity. Moreover, absence of good corporate governance and inadequate policy support also caused under
penetration. An autonomous regulator was formed in 2010 after 26 years of privatization.

However, non-life insurance sector is concentrated. Among the listed non-life insurance companies, 47% of the gross
premium is accounted for top five companies. Greendelta is at the top of the list with 14% market share, followed
by Pioneer Insurance with 11%, Reliance Insurance with 10%, Pragati Insurance with 8% and Eastland Insurance with
4%. Concentrated market structure may be interpreted as lack of product diversity among the market participants
and/or absence of thirst to capture new market beyond the existing market. This concentrated market structure,
perhaps, an explanatory variable of the steeper competition that is prevailing in the non-life insurance sector.

Top Five Listed Non-life Companies on the Basis of Market Share for Period Ended December 31, 2018
Market Share Gross Premium Net Premium Mgt Expense Underwriting ROE ROA
(BDT mn) (BDT mn) (BDT mn) Profit Margin
Particulars (BDT mn)
GREENDELT 14% 3679 1661 554 5857 4.0% 2.3%
PIONEERINS 11% 3012 1636 420 3010 7.9% 5.9%
RELIANCINS 10% 2689 1312 427 5814 9.6% 5.7%
PRAGATIINS 8% 2053 817 312 3252 5.0% 4.1%
EASTLAND 4% 1115 506 185 1603 7.0% 4.3%
Source: Annual Reports, EBLSL Research

Bottlenecks of Non-Life Insurance Sector Challenges in Non-Life Insurance Sector

Higher agency commission than the prescribed regulatory limit for
acquiring business seemed as the sharpest peril in the insurance  Steeper competition
 Agency commission
industry according to the expert and industry insider. Interestingly
 Absence of good corporate governance
this is the by-product of most of the problems exist in the insurance
 Inadequate regulating and supervising
industry. Higher number of companies than the required causes
ability of IDRA
steeper competition and sources of many other malpractices. For  Absence of appropriate regulation in many
instance, there are 31 non-life insurance companies in India which cases.
are 47 in Bangladesh. Considering size of the economy this is too  Dependency on agent based business
high and considering the size of the insurance sector this is model
eccentric. Corporate governance of non-life insurance has been a  Shortage of manpower with required skill
question. IDRA, as regulator, is responsible for ensuring good  Lack of trust
governance of this sector. However, resource shortage of IDRA is  Absence of innovative products
an impediment on the way of good governance of this sector.  Absence of use of required technology
There is discrepancy in financial reporting among the insurance  Absence of countrywide awareness
companies since no prescribed format has been circulated by IDRA building program
till date. Moreover, prudential regulation like solvency margin ratio

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 Overview of Non-Life Insurance Sector of Bangladesh Date: October 17, 2019

has not been set yet. Therefore, inadequate capacity of IDRA due to its infancy is a matter of concern. However,
these issues are expected to be solved as result of ongoing World Bank Project with IDRA.

Absence of appropriate technology in the insurance business resulted in distance between insurance companies and
their clients. Distance distorts transparency, in many cases, and eventually resulted as dis-trust. A bank account
holder gets the regular automated update of his bank account through many means of technology but a policy holder
hardly gets anything as such from the insurance companies. Congruent nature of products among the companies
tied them within a same set of target client base which is also a problem. Customizing insurance product and deriving
innovative insurance product is essential to get rid of this problem. Unawareness regarding the benefit of insurance
product qualifies as a problem of this sector and visible awareness building program on massive scale is absent.
However, among the mentioned obstacles, agency commission is most talked issues and solving this problem may
result in fundamental change of this sector. In other words, up-rooting the problems related to agency commission
means mitigation of problems related to corporate governance, steeper competition, inadequate monitoring of IDRA
and so on.

Regulatory Environment
Insurance Development and Regulatory Authority (IDRA) is the sole entity to regulate the insurance business in
Bangladesh. It was formed in 2010 under the Insurance Development and Regulatory Authority Act 2010, and it is a
de-facto and de-jury independent entity after three years of its
formation. However, due to the infancy of IDRA, insurance sector is Regulatory Fact-Box
loosely regulated and supervised. Enormous required regulation is
absent till date which causes the disharmony. Capacity  Minimum Paid-Up Capital BDT 400 million
 Maximum sponsor shareholding is 60%
development of IDRA in all front -namely human capital, technical
 Local Insurance companies are required
knowledge and technological know-how- is essential for tapping
to be listed in capital market within 3
the untapped opportunity of this sector. years of incorporation. Time may be
extended for two years with the approval
The supreme governing act for insurance companies of Bangladesh
of authority.
is the Insurance Act 2010. Any entity conducting insurance business
 Mutual Insurance companies are not
in Bangladesh must follow the caveats of this act and this act
allowed to conduct non-life insurance
empowered IDRA to promulgate subsequent regulations whenever business
required. As per Insurance Act 2010, minimum paid capital  An insurance companies cannot conduct
requirement for non-life insurance companies is BDT 400 million, of both life and non-life insurance business.
which 60% would be provided by the sponsor rest would be open  Highest agency commission is 15% of the
for public subscription. All the local insurance entities must be Gross Premium of own business
enlisted in capital market through IPO to accumulate rest amount  Restriction to enter in Public Sector
of paid-up capital within the three years from the incorporation. business (PSB)
Two years may be extended with the prior permission of authority.  50% of PSB is equally divided among the
private non-life companies by Sadharan
Moreover, this act made it mandatory for non-life insurance
Bima Corporation
companies to invest in Bangladesh Government Treasury Bond
 BDT 25 million to be invested in
(BGTB) minimum BDT 25 million. Apart from this IDRA, being Bangladesh Government Treasury Bond
empowered by IDRA Act 2010 and Insurance Act 2010, set 15% of  Minimum 40% of Net Premium reserve
gross premium of own business as the highest limit for agency for unexpired risk except marine hull and
commission. It also made minimum 40% of net premium as aviation. In case of marine hull and
unexpired risk reserve for any category of non-life insurance aviation insurance this is 100% of Net
business except marine hull and aviation insurance. In case of Premium.
marine hull and aviation insurance it was set as 100% of net  Highest limit of reserve for exceptional
premium. losses is 10% of net premium.

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 Overview of Non-Life Insurance Sector of Bangladesh Date: October 17, 2019

No private insurance companies are allowed to insure risk related to the property of government. As per MOA signed
between Sadharan Bima Corporation and Private Non-life insurance companies on 21st April 1990, no private
insurance companies will insure the mentioned risk, in return, they will get 50% of the business generated from
public property. In addition to above mentioned acts, there are other acts that also encompasses the non- life
insurance business in one or another meaning.

List includes following, but not limited to-

 The Contract Act 1872,  The Foreign Exchange Regulation Act 1947
 The Company Act 1991,  Income Tax Ordinance 1984
 The Co-Operative Society Act 2001,

Recent Developments
To overcome the problems of General Insurance Sector major Recent Developments
stakeholders took a number of initiatives in recent past. To stop undue
and undisclosed expenses, IDRA promulgated a circular in 2nd July  Launch of Uniform Messaging Platform
2019 that includes number of instructions such as- (UMP)
 Restriction on opening bank account
 Non-life insurance companies can operate maximum three bank beyond specific limit
accounts in three banks for premium collection. Extra bank  Circular of BIA to abide by the regulatory
accounts to be closed within 31st July 2019 by keeping three bank limit of the agency commission that is 15%
accounts open. of gross premium of own direct business.
 For preserving capital 1 bank account and for depositing other  Declaration of finance minister for
income 1 bank account may be opened. insuring building property
 For settling claim 1 bank account and for management expense  Instruction of finance minister for listing of
non-listed insurance companies.
another bank account can be opened.
 Commencement of Project with World
 Expenses more than ten thousand must be made through using
Bank to enhance IDRA’s capacity
non-negotiable cheque.
 All the instructions were to be implemented within 12th August
2019.

In addition to these, Bangladesh Insurance Association organized a meeting among the chairman, CEOs of Non-life
and IDRA where everyone agreed upon keeping agency commission within the prescribed regulatory limit of 15%.
In the early September IDRA formed a committee consisting of ten members to monitor the insurance companies.
Prior to this, on January 19, IDRA launched Uniform Messaging Platform (UMP) as a part of digitalization and
modernization. Through UMP insurance customers will receive the premium information and payment
confirmation- under the supervision of IDRA. Previously, this information gap sourced myriad objection regarding
claim from the policy holders. Moreover, finance mister recently declared that all building properties are to be
insured. Implementation of this will enhance the coverage of general insurance business. Apart from this, there was
indication in the Budget 2019-20 for the higher penetration of non-life insurance businesses such as Implementation
of accident insurance for factory workers, introduction of crop insurance, introduction of live-stock insurance,
introduction of health insurance for government employees, digitization of Insurance sector.

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 Overview of Non-Life Insurance Sector of Bangladesh Date: October 17, 2019

Project with World Bank

With the view to enhance the capacity of IDRA and Bangladesh World Bank Project
Insurance Academy a project was undertaken in 2017 named
“Bangladesh Insurance Sector Development Project 2”. Actual  Project Initiation 2018
commencement of this project took place in late 2018 and project is  Estimated Project Cost USD 80 million
expected to be completed within 2022. Estimated project cost is  Project will be completed in 2022
around USD 80 million. This project has three broad components  Project objective is
along with some sub-component. Broad components are- o to enhance IDRA’s capacity to
regulate and supervise
 Component 1: Improving the Capacity of the Insurance o to modernize the insurance
Development and Regulatory Authority (IDRA) and the sector through using technology
Bangladesh Insurance Academy (BIA) o to strengthen the capacity of
Bangladesh Insurance Academy
 Component 2: Modernization, Strengthening and Increasing the
o to introduce smart Risk Based
Efficiency of the State-Owned Insurance Corporations Supervision (RBS) approach for
 Component 3: Project Implementation, Management, and monitoring
Monitoring

Objectives of this project includes strengthening capacity of IDRA to regulate and supervise the insurance as well as
the reinsurance markets with the support of Bangladesh Insurance Academy (BIA), enhancing the capacity of BIA to
address the skills constraints and data needs for the market, enhancing the capacity of IDRA to set up sound legal,
regulatory and supervisory frameworks to improve supervision combined with strong infrastructure,
implementation of a stable and secured ICT, including cyber security infrastructure. This project also includes the
adoption and implementation of smart Risk Based Supervision (RBS) that will enable IDRA to set up proportionate
on-site and off-site supervision for tracking risk exposure of insurance companies.

Impact of recent developments

Above mentioned initiatives will impact non-life insurance
sector in many ways. Agency commission-biggest % Reduction of NPAT Increase NPAT increases
prevailing perils of insurance sector- will be reduced if the agency commission (BDT million) (in %)
taken initiatives are implemented accordingly. A small 5% 832.45 21%
reduction of unreported agency commission can have a 10% 1,664.90 41%
big impact on the net profit of non-life insurance 15% 2,497.35 62%
companies. For example, If agency commission reduced
by 5% of the Gross premium, sector will observe
Expected Impact of Recent Development:
approximately 21% growth of Net profit, considering the
gross premium of 2018 and six months annualized profit of
 Increase of IDRA’s capacity
 Increase of BIA’s capacity 2019 of listed non-life insurance companies. Moreover,
 Reduction of agency commission general insurance sector will get more avenues of the
 Increase of the insurance penetration business which will have positive impact on its gross
 Increase in growth of non-life insurance premium income, thus higher amount of investable funds in
companies their balance sheet. Apart from these, all the local insurance
 Listing of new insurance companies in the capital companies are legally bound to be listed within the three
bourse years of their incorporation and may extend the time for two
more years. Recently finance minister sought insurance

2
A summary of Project with World Bank is annexed as annexure 1

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 Overview of Non-Life Insurance Sector of Bangladesh Date: October 17, 2019

companies to be listed within December 2019. Therefore, we can expect insurance companies will be listed in capital
market within reasonable time if not within December 2019.

Budget proclamation of government, if implemented, will magnify the scope of non-life insurance business many
times. It is worthy to note that most of the recent reforms will be implemented in phase by phase. Therefore,
consequences will be taken place in different phases. It will not be surprising if size of this sector becomes double or
triple in next five years.

Growth Prospects and Growth Drivers of Non-Life Insurance Sector

There are unmatchable growing opportunities of this Insurance Penetration of major Southeast Asian
sector provided that the discussed problems are Countries
overcome. To elicit an idea of the growth opportunity
of this sector it is worthy to note that insurance sector Bangladesh 0.55%

has to grow at 52% to match the insurance penetration Srilanka 1.15%

Philiphines 1.82%
ratio of Srilanka by 2021, this growth rate has to be
Indonesia 1.95%
35% and 28% respectively if it is to be matched by 2023
Vietnam 2.42%
and 2025. Insurance Penetration ratio of Srilanka is
India 3.70%
lowest in this region excluding Bangladesh. Therefore, Chaina 4.22%
it is clear that there is sheer opportunity for growth of Malaysia 4.77%
this sector. As per as non-life insurance sector is Thailand 5.27%
concern, prospective growth of this sector is likely to
0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00%
be driven by economic expansion of the country,
Source: PWC Report
private sector loan growth, demographic composition
and the import growth. Assurance of good governance will help this sector to have long strides within a short time
by omitting the back log of this sector. However, realization of the importance of this sector by the policy makers,
perhaps, is commencement of a new dawn.

Consideration
GDP Growth 13% in nominal Gross Premium BDT 120.17
GDP BDT 25,261 billion
terms billion
If Bangladesh wants to touch
of Srilanka of Philippines of Indonesia of Vietnam of India
Insurance Penetration it has to grow
in 3 years 52% 77% 81% 95% 124%
in 5 years 35% 48% 50% 57% 70%
in 7 years 28% 37% 38% 43% 52%

GDP and Nominal Growth Rate

Economic expansion GDP(BDT bn) Nominal Growth
30000 20%
Bangladesh's GDP has been growing at an unprecedented pace. 25000
Since 2010 GDP has been growing more than 12% in nominal terms 20000
15%

on a consistent basis. Growth of GDP indicates the higher economic 15000 10%
activity which is directly related to activities of financial sector. 10000
5%
Pace of real sector and financial sector activities raises the need for 5000
risk management products such as insurance. Private Investment 0 0%
2011 2012 2013 2014 2015 2016 2017 2018 2019
growth, another closely related macro-economic indicator- is more
Source: Bangladesh Economic Review 2019

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 Overview of Non-Life Insurance Sector of Bangladesh Date: October 17, 2019

than 13% since 2010. Though growth of private sector investment has been sluggish in recent past, still it is higher
considering the growth of this sector.

Categorywise Investment and Investment Growth

Public Investment (BDT bn) Private Investment Public Investment Growth(BDT bn) Private Investment Growth

6,000 34%
5,000
28%
4,000
3,000 22%
2,000
16%
1,000
0 10%
2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: Bangladesh Economic Review 2019

Import growth
As per Import Policy Order 2015-2018, import under CIF,
CIP and DDP is prohibited unless prior approval is taken. Import Growth
Import(USD mn) Growth
Apart from this, insurance cover note is required in order
60,000 60%
to issue documentary credit as a mode of payment of
international trade. These imply non-life insurance sector 50,000 50%

is tagged with import and higher portion of import related 40,000 40%
insurance business held to domestic insurance
companies. More specifically, marine cargo and marine 30,000 30%

hull insurance are determined by the import growth of 20,000 20%

the country. Since 2010, country’s import growth is
10,000 10%
around 12%. Unfortunately, business growth of insurance
companies is not near to that in aggregate terms. 0 0%
However, for the continuation of the economic growth 2010 2011 2012 2013 2014 2015 2016 2017 2018

import will continue its growth until the next economic Source: Bangladesh Economic Review 2019

cycle takes place. Growing import is likely to have positive

impact on the business growth of this sector.
ADP Expenditure and Growth
Infrastructure Development 2,100
ADP Expenditure(BDT billion) Growth
35%
Bangladesh government has invested heavily in
1,800 30%
infrastructure in order to ensure convenient connectivity
1,500 25%
across the nation, intra-city transportation of capital,
1,200 20%
power to the business and so on. ADP expenditure stood
at BDT1796 billion in FY’2018-19 from BDT358 billion 900 15%

since 2010-11. Currently, out of 10 fast track mega 600 10%

projects, development work of 9 projects is going on and 300 5%

another project has been completed already. Combined 0 0%
estimated expenditure of these projects is BDT 273,636 2011 2012 2013 2014 2015 2016 2017 2018 2019

billion. Apart from these, many other infrastructure Source: Bangladesh Economic Review 2019
development projects are going on. As a result of this
improved and improving infrastructure, myriads public and private are generating. Pace of private investment, thus,

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 Overview of Non-Life Insurance Sector of Bangladesh Date: October 17, 2019

private property creation will be boost up as this project gets done and ongoing monetary crunch is out of the scene.
It may be deciphered as Government investment in infrastructure will be resulted as generation of public and private
property. Therefore, insurable interest of the country will grow up and leave the opportunity for general insurance
companies to grab. These usher the hope for positive changes of Non-Life Insurance Sector is exploited by
companies.

Private Sector Credit

Private Sector Credit Growth
There is no alternative of creating monetary instrument for Private Sector Credit (BDT billion) Growth
continuing our robust economic growth. Robust economic 12000 25%
growth causes higher demand for loan. As a result, issuance of 10000 20%
higher monetary instruments becomes necessary, otherwise,
8000
monetary crunch takes place. Creation of monetary instruments 15%
6000
is highly dependent on private sector credit. Therefore private 10%
sector credit growth must be in line with the economic growth. 4000

Though in recent past we have seen declining growth of private 2000 5%

sector, however, this situation is temporary. With the easing of 0 0%

crowding out, private credit growth is expected to move upward 2012 2013 2014 2015 2016 2017 2018 2019

at an accelerated pace. In recent past, our private credit

Source: Bangladesh Economic Review 2019
growth is hovering around 10% to 15%. On the other hand,
broad money growth rate is declining since 2016 due to Broad Money Growth
cautious policy measure of Bangladesh Bank in order to check Broad Money (BDT billion) Growth
demand pull inflation and heavy government borrowing from 14,000 25%

non-banking channel. There is positive relationship between 12,000

20%
10,000
private sector credit growth and gross premium growth of non- 15%
8,000
life insurance sector. In practice, commercial banks sought
6,000 10%
insurance coverage of primary security of funded loans. 4,000
Therefore, higher expected growth of private credit will cause 2,000
5%

higher gross premium in future. 0 0%

2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: Bangladesh Economic Review 2019

Demographic Dividend
Bangladesh is passing through a phase of demographic dividend that emerged in 2007, according to analysts. Only
5% of the total population is aged, more than 34% are 15 years or younger. Most of the people belong to the labor
force, resulted as higher number of earners. Exploiting the opportunity of demographic dividend may bring the
miracle to the economy which is evident from Japan and China. This demographic pattern is linked to the business
activities of the country, eventually, to the financial sector. Sale of luxury goods such as private car is positively
related to per-capita GDP, and demographic composition will intensify this positive relationship. In 2017, for
instance, 19,573 private passenger car was registered in Dhaka city which is 139% higher than in comparison to 2012.
Countrywide this figure was 21959 which is 138% higher in compare to 2012. Demographic dividend has positive
impact on entrepreneurial activities. New business ventures have been being set up over the time and pace of these
new business ventures will be geared up with the development of infrastructure. As a result, total number of vehicles
will be increasing. In 2017, total 420398 vehicles were registered with BRTA across the country which is 162% higher
in comparison to 2012. Increasing number of vehicles will have positive impact on the growth of non-life insurance
business since registration of vehicles requires availing insurance policy.

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 Overview of Non-Life Insurance Sector of Bangladesh Date: October 17, 2019

Regulatory reform
As mentioned earlier, developments are taking place from the policy point of view. Inadequate policy support may
define the gap between related macro indicators and the growth of non-life insurance sector and insurance sector
as a whole. Inadequate monitoring ability of IDRA due to lack of automation and manpower left the scope for
insurance companies to engage in malpractices. This capacity related problem will be alleviated to large extent once
the project with World Bank is completed. In the meantime, IDRA’s regulating and supervising capacity is expected
to go up. Moreover, government has taken initiatives, as previously mentioned, to enlarge the scope of insurance.
These will play the role of catalyst for the non-life insurance sector growth.

Private Public Import Private

GP of Non-Life GDP ADP Expenditure
Year (BDT mn) (BDT bn)
Investment Investment (USD
(BDT bn)
Sector Credit
(BDT bn) (BDT bn) mn) (BDT bn)
2011 19,249 6,463 2,030 482 21,388 359 3,407
2012 21,646 6,885 2,374 608 32,527 411 4,079
2013 22,947 7,299 2,608 796 33,309 524 4,522
2014 24,440 7,741 2,960 880 33,576 600 5,076
2015 26,387 8,249 3,345 1,034 36,571 750 5,746
2016 27,627 8,835 3,984 1,155 37,662 910 6,710
2017 29,810 9,479 4,564 1,465 39,901 1,160 7,761
2018 33,970 10,224 5,235 1,794 43,491 1,537 9,075
Source: Bangladesh Economic Review 2019, Bangladesh Insurance Association, Selected Macroeconomic Indicators

Risk Factor
Agency commission is an age old practice of the industry. Not only the companies but also clients are used to this
business practice. In many instances, policy holders demand premium discount and choose to open policy in a
company that pays higher discount. Moreover, this industry is concentrated to few companies. Therefore, it might
be difficult for small companies to acquire business by reducing agency commission all of a sudden. Combined effect
of these may reduce business volume of small companies at the initial stage. In worst scenario, it may backfire at
the early stage if not handled properly. In addition, pre-dominant agent base business model may be a hindrance
for implementing agency commission related due diligence. Companies are dependent on agent for getting business.
Complete compliance regarding agency commission will depend on finding other business models. In 2012, IDRA
prescribed agency commission limit 15% of gross premium. However, thereafter companies paid agency commission
higher than 15% evading the eyes of regulator. It raises question whether still there is scope of such malpractices.
Development of fundamental input is essential for fundamental output change. Inputs such as human capital,
corporate governance and appropriate policy are exigent. Supply of these inputs is not a matter of day. It takes time
and combined effort.

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Overview of Non-Life Insurance Sector of Bangladesh Date: October 17, 2019

Implications for Capital Market

 Fundamental of non-life insurance sector is expected to change positively. This change will take place in
different phases. In initial phase it will be driven by lesser agency commission cost which will have
significant impact on NPAT. Later on, fundamental change will be driven by the higher monitoring,
greater stability of the sector and larger penetration. Second phase would be slower and permanent
whereas first phase will be relatively faster but transient.
 Large companies are likely to reap more benefits than the small companies due to the lesser sensitivity
of agency commission with the business volume.
 Fundamentally good scrip may be a choice for long term investment. These stocks may be considered as
growth stocks.
 Due to lower paid-up capital of listed non-life insurance companies, price volatility and excessive trading
compare to its market capitalization may take place in the initial years of fundamental development
phase.
 Listing of unlisted companies may create a short-term fund crisis in the market if the IPO of the
companies takes place within short interval.

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 Overview of Non-Life Insurance Sector of Bangladesh Date: October 17, 2019

Selected Data of Listed Non-Life Insurance Companies (as on December 2018)

Company Net Total Audited
GP NP ME AC UP Equity FDR NAVPS
Name Profit Asset EPS
AGRANINS 383 199 66 47 51 50 806 517 200 1.73 17.96
ASIAINS 617 422 144 91 97 66 1617 937 687 1.41 19.91
ASIAPACINS 526 334 84 79 72 66 1371 815 469 1.57 19.24
BGIC 626 337 235 84 28 56 1665 1102 485 1.04 20.40
BNICL 502 372 99 65 63 89 1326 840 747 2.00 18.99
CENTRALINS 351 243 138 45 41 100 1807 1109 545 2.13 23.56
CITYGENINS 436 296 127 55 81 86 1314 1104 562 1.26 16.19
CONTININS 618 322 152 80 99 54 1123 689 371 1.55 19.93
DHAKAINS 327 208 103 39 81 80 1993 945 608 1.99 23.54
EASTERNINS 460 235 78 59 88 153 2303 1898 1200 3.56 44.02
EASTLAND 1115 506 185 156 123 109 2422 1486 474 1.48 21.13
FEDERALINS 512 304 129 67 93 34 1351 728 123 0.52 11.30
GLOBALINS 400 198 84 50 41 20 809 456 221 0.54 12.41
GREENDELT 3679 1661 554 547 403 249 10835 6164 814 3.09 76.39
JANATAINS 351 219 62 43 80 43 965 595 302 1.06 14.77
KARNAPHULI 327 156 105 39 27 56 1313 880 576 1.31 20.59
MERCINS 343 191 91 41 2 48 1779 778 885 1.11 18.06
NITOLINS 772 565 144 98 123 119 1592 972 819 2.96 24.18
NORTHRNINS 462 247 66 49 120 70 1355 910 225 1.65 21.32
PARAMOUNT 261 114 62 28 6 17 716 433 308 0.55 13.69
PEOPLESINS 703 440 215 95 11 72 2213 1234 1007 1.56 26.72
PHENIXINS 759 439 292 97 82 103 2212 1449 265 2.56 35.93
PIONEERINS 3012 1636 420 437 285 267 4496 3398 940 3.82 48.55
PRAGATIINS 2053 817 312 267 157 185 4546 3722 440 3.02 60.72
PRIMEINSUR 683 241 124 92 102 46 1304 675 86 1.12 16.52
PROVATIINS 485 379 129 73 53 53 935 549 353 1.77 18.50
RELIANCINS 2689 1312 87 393 416 498 8805 5197 2315 5.21 54.36
REPUBLIC 534 355 166 70 81 61 1055 564 393 1.55 14.32
RUPALIINS 876 514 200 121 92 120 2346 1594 966 1.72 22.87
SONARBAINS 448 338 132 68 88 62 1039 706 261 1.65 18.69
STANDARINS 473 279 131 48 29 79 1122 720 807 2.01 18.28
TAKAFULINS 428 215 162 54 51 54 1001 648 564 1.35 16.13
UNITEDINS 472 278 177 61 43 92 1652 1369 407 2.18 32.59
Source: Annual Reports 2019, EBLSL Research

Note:
 Data are represented in BDT million except Audited EPS and NAVPS. Audited EPS and NAVPS are represented
in BDT.
 Data are marked as positive aspect.
 GP- Gross Premium, NP- Net Premium, ME- Management Expense, AC- Agency Commission, UP-Underwriting
Profit

12
 Overview of Non-Life Insurance Sector of Bangladesh Date: October 17, 2019

Selected Ratios of Listed Non-Life Insurance Companies Based on Financial Statements 2018

Company Risk UP NPAT/ Claim Mgt. FDR

ROA ROE AC/GP
Name Retention Margin GP Ratio Exp/ GP /Asset
AGRANINS 51.9% 6.2% 9.54% 13.2% 13.0% 25% 12.38% 17% 24.8%
ASIAINS 68.4% 4.1% 7.44% 15.7% 10.8% 28% 14.74% 23% 42.5%
ASIAPACINS 63.5% 4.8% 8.28% 13.7% 12.6% 33% 15.00% 16% 34.2%
BGIC 53.9% 3.4% 5.30% 4.5% 9.0% 33% 13.49% 38% 29.1%
BNICL 74.1% 6.7% 11.10% 12.5% 17.6% 89% 13.00% 20% 56.3%
CENTRALINS 69.4% 5.6% 8.98% 11.8% 28.6% 16% 12.89% 39% 30.2%
CITYGENINS 67.8% 6.5% 8.10% 18.6% 19.7% 23% 12.68% 29% 42.7%
CONTININS 52.2% 4.8% 7.92% 16.0% 8.7% 15% 12.99% 25% 33.0%
DHAKAINS 63.7% 4.0% 8.27% 24.9% 24.4% 2% 11.93% 32% 30.5%
EASTERNINS 51.1% 6.7% 8.37% 19.1% 33.4% 14% 12.84% 17% 52.1%
EASTLAND 45.4% 4.3% 6.67% 11.0% 9.3% 15% 13.97% 17% 19.6%
FEDERALINS 59.4% 2.5% 4.53% 18.1% 6.5% 19% 13.04% 25% 9.1%
GLOBALINS 49.6% 2.5% 4.56% 10.2% 5.0% 5% 12.49% 21% 27.3%
GREENDELT 45.1% 2.3% 3.97% 11.0% 6.8% 28% 14.88% 15% 7.5%
JANATAINS 62.4% 4.4% 7.41% 22.8% 12.2% 22% 12.14% 18% 31.3%
KARNAPHULI 47.9% 4.3% 6.58% 8.2% 17.1% 18% 11.93% 32% 43.8%
MERCINS 55.9% 2.7% 6.19% 0.6% 14.0% 51% 12.07% 27% 49.7%
NITOLINS 73.1% 7.5% 12.25% 16.0% 15.4% 42% 12.73% 19% 51.4%
NORTHRNINS 53.3% 5.2% 8.01% 26.0% 15.2% 28% 10.51% 14% 16.6%
PARAMOUNT 43.6% 2.4% 4.02% 2.3% 6.7% 36% 10.78% 24% 43.0%
PEOPLESINS 62.6% 3.3% 6.03% 1.6% 10.3% 39% 13.57% 31% 45.5%
PHENIXINS 57.8% 4.7% 6.92% 10.8% 13.6% 7% 12.80% 38% 12.0%
PIONEERINS 54.3% 5.9% 8.47% 9.4% 8.9% 30% 14.52% 14% 20.9%
PRAGATIINS 39.8% 4.1% 5.69% 7.7% 9.0% 13% 13.00% 15% 9.7%
PRIMEINSUR 35.3% 3.5% 6.64% 14.9% 6.7% -3% 13.52% 18% 6.6%
PROVATIINS 78.1% 5.6% 10.06% 11.0% 10.8% 40% 15.00% 27% 37.8%
RELIANCINS 48.8% 5.7% 8.57% 15.5% 18.5% 16% 14.61% 16% 26.3%
REPUBLIC 66.4% 5.8% 10.46% 15.2% 11.4% 20% 13.12% 31% 37.3%
RUPALIINS 58.7% 5.1% 7.87% 10.5% 13.7% 40% 13.82% 23% 41.2%
SONARBAINS 75.4% 6.0% 9.50% 19.7% 13.9% 21% 15.23% 29% 25.1%
STANDARINS 59.0% 7.1% 11.32% 6.2% 16.7% 18% 10.15% 28% 71.9%
TAKAFULINS 50.3% 5.4% 7.94% 12.0% 12.7% 5% 12.66% 38% 56.3%
UNITEDINS 58.9% 5.5% 6.62% 9.2% 19.4% 19% 12.88% 37% 24.6%
Source: Annual Reports 2019, EBLSL Research

Note: Data are marked as positive aspect.

13
 Overview of Non-Life Insurance Sector of Bangladesh Date: October 17, 2019

Annexure1

Project : Bangladesh Insurance Sector Development Project

Total Project cost: US$80 million Proposed Credit: US$65 million
Effectiveness Date: 08-Jul-2018 End Date: 31-August -2022

Objectives:
 Strengthen institutional capacity of the regulator and state owned insurance corporations
 Increase coverage of insurance in Bangladesh.

Project Components Cost

Improving the Capacity of the Insurance Development and US$30 million;
Regulatory Authority (IDRA) and the Bangladesh Insurance Academy US$25 million IDA Credit
(BIA)
Modernization, Strengthening and Increasing the Efficiency of the US$45 million;
State-owned Insurance Corporations US$38 million IDA Credit
Project Implementation, Management, and Monitoring US$5 million; US$2 million IDA Credit

Component 1: Improving the Capacity of the Insurance Development and Regulatory Authority (IDRA) and the
Bangladesh Insurance Academy (BIA)
 Strengthening the capacity of IDRA to regulate and supervise the insurance as well as the reinsurance
markets with the support of BIA.
 Enhancing the capacity of BIA to address the skills constraints and data needs for the market as well as IDRA
to set up sound legal, regulatory and supervisory frameworks to improve supervision combined with strong
infrastructure
 Implementation of a stable and secured ICT, including cybersecurity infrastructure. It will finance goods and
equipment, non-consulting as well as consulting services, training and workshops.

Sub-component 1a: Strengthening the Capacity of the Regulator IDRA

 Design and implement a governance and accountability framework of IDRA, establishing an effective
autonomous authority, and strengthening internal control functions. This will require a review of the IDRA
Act which may lead to a number of amendments in the future.
 Upgrade IDRA’s supervisory function with provision of goods and equipment, as well as technical assistance
(TA) through:
o Adoption and implementation of a smart RBS for consumer protection;
o Improvement of IDRA’s understanding of Insurance Core Principles (ICPs) and regulatory reporting;
o Set up research and statistical unit for the collection of data, update of mortality and morbidity
tables, and publication of annual reports;
o Increasing IDRA’s capacity to set up rules, regulations and guidelines to improve insurance
products and market practice (for example micro-insurance Takaful i.e. Islamic insurance, livestock
insurance, motor insurance along with MTPL, property insurance); and develop new insurance
channels such as bank-assurance; and
o The improvement of corporate governance of claims management as well as complaints redress
systems.
 Capacity building of IDRA’s staff, management and members through training, exposure visits and twinning
arrangements. Twinning arrangements with other regulatory bodies will be facilitated.

14
 Overview of Non-Life Insurance Sector of Bangladesh Date: October 17, 2019

 Finance a study to explore the feasibility of a national social insurance scheme (NSIS), the implementation
of which has been entrusted to IDRA under the National Insurance Policy.

Sub-component 1b: Strengthening the Capacity of BIA

Help BIA to become a reliable resource in Bangladesh for training & research and achieve national recognition. The
project will provide technical advisory support as well as goods and equipment to BIA to undertake the following:
 Design and implement corporate governance and new organizational structure.
 Improve data infrastructure and advance knowledge in the sector.
 Build up a research center for insurance/reinsurance to develop human capital, explore other priority areas
for insurance sector development, improve awareness among the public at large and develop activities to
improve consumer (policy holder) protection and financial literacy (CPFL).
 Develop appropriate course curriculums and manuals; modernize BIA training facilities
 Build capacity of BIA staff, faculty, management and board members through training, exposure visits and
twinning arrangements. BIA could offer academic degrees through affiliation with universities (for example
Dhaka University).

Component 2: Modernization, Strengthening and Increasing the Efficiency of the State-Owned Insurance
Corporations

Assist state-owned insurance corporations (JBC and SBC) to improve their systems and business practices. This will
help them run their businesses on a commercially sound basis and to increase insurance coverage and thus
contribute better to the development of the insurance sector in Bangladesh. Project activities will focus on the
following:
 Improving organizational structure and strengthening corporate governance of JBC and SBC along with
internal control, better transparency, efficiency and compliance with regulatory requirements including
implementation of the amendments of the Insurance Corporation Act and the new paid up capital
requirements for JBC and SBC16 as well as other requirements aimed at improving risk management and
transfer.
 Advisory support services to BFID as the agency exercising the Government’s ownership rights over the
state-owned insurance corporations and IDRA as the regulator will also be provided.
 Modernization, upgrade of IT systems and capacity building of SBC and JBC through a provision of TA as well
as goods and equipment to improve their operations and business practices including enterprise risk
management and business process reengineering, underwriting, claims management and risk transfer
mechanism; strengthening policy and practice on reinsurance mechanism; helping develop and improve
distribution channels such as bank-assurance to reach a broader population spectrum; and allow efficient
distribution of insurance products including through banks and other financial institutions as well as digital
channels for low-cost offers.
 Capacity building including twinning arrangement and training for staff, faculty, management and board
members will also be financed.

For SBC reinsurance activities: Resident technical advisory services for the strengthening of a separate reinsurance
department at SBC, following the latest proposed amendments of the Insurance Corporation Act, that SBC
reinsurance activities should be undertaken through a separate division of SBC with a firewall between general
insurance and reinsurance activities. This approach is meant to pave the way for the reinsurance business of SBC to
be spun off as a subsidiary or a separate company at a later date.

15
 Overview of Non-Life Insurance Sector of Bangladesh Date: October 17, 2019

Component 3: Project Implementation, Management, and Monitoring

Develop a strong monitoring and evaluation (M&E) system to assess progress on implementation. It will finance
consultant and non-consulting services, training and operating costs, including costs for project management, M&E,
and capacity building.

*Smart RBS is a supervision approach that uses in a proportionate manner both off-site monitoring and on-site inspections to examine the
business model of each insurer, evaluate its condition, risk profile and conduct, the quality and effectiveness of its corporate governance and its
compliance with relevant legislation and supervisory requirements.
*The ICPs provide a globally accepted framework for the supervision of the insurance sector. The ICP material is presented according to a
hierarchy of supervisory material. The ICP statements are the highest level in the hierarchy and prescribe the essential elements that must be
present in the supervisory regime in order to promote a financially sound insurance sector and provide an adequate level of policyholder
protection
*The new paid up capital is expected to be raised to BDT 1.25 billion (US$16 million equivalent) for SBC and BDT 300 million (US$4 million
equivalent) for JBC. While SBC has the resources to comply with the new capital requirement when the amendments become effective later in
2016, JBC will be provided financial support from the Government’s budget. In both cases, GoB’s intervention will be required.

16
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