The government decision to award 11 new insurance licences to pro-Awami League businessmen would raise unhealthy competition among the insurance companies and result in merger-acquisitions in the long run, economists predicted. Experts in the insurance sector said that the government’s decision to award the Awami League loyals with insurance licences would distort the over-crowded business environment of the sector and the number of unhealthy companies would increase due to increased competition.
They also said that in the long run it would be difficult for the companies to survive due to shortage of demand of insurance compared with the large number of insurance service providing companies.
The Insurance Development and Regulatory Authority on Thursday decided to issue licenses to nine new life insurance companies and two general insurance companies.
Mercantile Islami Life Insurance Ltd, Taiyo Summit Life Insurance Co Ltd, Sonali Life Insurance Co Ltd, NRB Global Life Insurance Co Ltd, Protective Life Insurance Co Ltd, Guardian Life Insurance Ltd, Chartered Life Insurance Co Ltd, Best Life Insurance and Zenith Islami Life Insurance Ltd are the new companies which will get licenses for life insurance companies. Sikder Insurance and Sena Kalyan General Insurance would get licenses for setting up general insurance companies.
‘It would be difficult for the large number of companies to survive in the market. In the long rune many of these companies would go for merger-acquisition as they would not find any other option to survive,’ Osman Imam, who teaches finance in Dhaka University, told New Age.
‘Along with the insurance companies, banks and none-banking financial institutions might face the same situation,’ he warned.
‘The existing insurance companies had already pointed out that there was no need of new insurance companies in the country as the market is already over-crowded,’ Green Delta Insurance Company managing director Nasir A Choudhury told New Age.
He said that compared with the neighboring country India, Bangladesh is having large number of insurance companies. India has only 28 insurance companies, including life and general insurance companies, while Bangladesh already had 62 insurance companies.
He said the government decision to allow 11 new companies would seriously affect the business environment of the insurance sector.
Earlier, the previous Awami League-led government had issued 11 licenses for new insurance companies in 1996-2001, with three given on the last day of the government under controversial circumstances in 2001.
The government lawmaker and railway minister Mujibul Haque is among other sponsors of the newly approved Sonali Life Insurance Company Limited.
Awami League chief whip Abdus Shahid is one of the sponsors of Chartered Life Insurance Company Limited, while a pro-Awami League businessman and Unique Hotel and Resorts Limited managing director Noor Ali is among the sponsors of the company.
Member of Parliament for women’s seat Faridunnahar Laily got the licence of Zenith Islami Life Insurance, while Awami League leader in Chittagong M Nasir Uddin is among the sponsors of Mercantile Islami Life Insurance.
Awami League leader and former home minister Rofiqul Islam is among the sponsors of Protective Life Insurance Company Limited. Muhammed Aziz Khan, brother of civil aviation and tourism minister Faruk Khan, is among the sponsors of the Taiyo-Summit Life Insurance Company Limited, a joint-venture project with Japan-based Taiyo company.
The IDRA had called for hearing of 75 applicantions for the licenses between June 16 and 20 after the authorities had received 77 applications till May 15, the last date of submission of applications.
The authorities took the decision only in 15 days to award the licenses because of the pressure from the government high-ups, said sources.
The government recently also awarded licenses for nine commercial banks to some members of parliament of the ruling alliance and businesses loyal to Awami League amid widespread criticism.
There are 62 insurance companies operating in the country; 43 are general insurers, 17 are life insurers while the remaining two are government owned — one life and another non-life insurance company.
-With New Age input
