Some 27 insurance companies out of a total of 60 registered are in the process of going for initial public offering (IPO) soon.
Due to the legal obligation, which requires a company to go public after three years of business operation as per Insurance Act-1980, and increased paid-up capital requirement, insurance companies are facing problems in listing with the bourses.
While talking to The FE Sunday, Bangladesh Insurance Association General Secretary Nurul Islam made the disclosure.
He said if the duration is of six years instead of three years, it will be easy for the companies to go for initial public offering under the situation of increased paid-up capital requirement
A total of 60 insurance companies are now operating in the country. Of them, 35 have been registered after 1996 with the increased paid-up capital requirement of Tk 75.0 million for each life insurance company and Tk 150.0 million for each general insurance company.
As per the Act of 1980, the amount of minimum paid-up capital for a general insurance company was Tk 30 million and for a life insurance company Tk 15 million.
The requirement of minimum paid-up capital was doubled in 1991 to Tk 60.0 million for a general insurance company and Tk 30 million for a life insurance company.
As per the provision of 1991, the remaining 25 companies, registered before 1996, had the minimum paid-up capital requirement of Tk 30 million for a life insurance company and Tk 60 million for a general insurance company.
Out of 60 companies currently doing business, 31 are listed. Of the remaining 29, two companies, namely American Life Insurance Company and Cooperative Society Limited, will not go into the secondary market, he added.
And out of the remaining 27 companies, some have received permission to go for IPO floatation and some have been refused, he added.
An insurance company with higher paid-up capital than that of another one which has less paid-up capital has to make more profit to declare the same dividend.
When a company is listed with the bourses, it cannot declare dividend of less than 10 per cent. And if it does so then it will be downgraded and performance will be ranked as poor.
About the uniform level of minimum paid-up capital requirement for all the insurance companies in a bid to remove the disparity in the sector, he said it is not so simple as two types of insurance companies are not same in all aspects.
About the mushrooming growth of the so-called authorised insurance agencies and their current trend of cheating the common people across the country, he said it must be controlled to ensure a healthy competition in the capital market.