Insurers’ asset, investment growth drops

The life and non-life insurance sectors have been in a tight spot for the past three years due to the economic shocks resulting from Covid-19 and the ongoing war between Russia and Ukraine.

As a result, their asset accumulation and investment growth dropped in 2021 and 2022.

Assets of insurers rose 4.55 per cent to Tk 63,629 crore last year while it grew by 6.29 per cent and 7.27 per cent respectively in 2021 and 2022, according to the Insurance Development and Regulatory Authority (IDRA).

The last three years was not a good time for the insurance sector for various reasons, namely the global economic turmoil stemming from the coronavirus pandemic and Russia-Ukraine war, said Ahmed Saifuddin Chowdhury, managing director and CEO of Bangladesh General Insurance Company Limited.

No private industry in the country showed significant growth during the period as economic fallout had an adverse effect on companies' wealth and investment.

"The period was so tough that many insurers had to settle claims even if they didn't make profit. As a result, many of them had to settle claims by enchasing their fixed deposit receipts [FDRs]," he said.

"So, how can investment grow when they are settling claims by pouring cash and FDRs?" Chowdhury added.

Investments by insurance companies rose by around 1 per cent to Tk 46,484 crore in 2022 while it had increased by 5.80 per cent and 8.34 per cent respectively in the two years prior, IDRA data shows.

Premiums collected by the insurance sector rose nearly 17 per cent year-on-year in 2022 even though the business continued to face the challenges of Covid-19 and Russia-Ukraine war.

"Insurance companies suffered due to the recent US dollar shortage as the subsequent economic fallout impacted the overall business," said Md Sana Ullah, managing director and CEO of Bangladesh National Insurance Company Limited.

Businesspeople were facing obstacles to import raw materials by opening letters of credit (LCs) but even so, they had to bear all the expenses on a regular basis.

So, the growth of the assets of the companies was hit. Besides, investment growth slowed down too, he added.

LC opening slumped 14 per cent year-on-year in the July-December period of the current financial year (2022-23). Meanwhile, settlements declined 9 per cent, as per Bangladesh Bank data.

Ullah expressed concerns that the year 2023 will be the worst for the insurance industry compared to its performance in the last three years.

Sheikh Rakibul Karim, CEO of Guardian Life Insurance Limited, blamed the economic recession caused by Covid-19 for the sufferings of the insurance sector as the situation has had a huge effect on business.

"When a company gets older, their insurance maturity increases so their life fund drops," said Jalalul Azim, managing director and CEO of Pragati Life Insurance.

If the life fund drops, then the asset does not rise at the previous rate. Assets of insurance companies can also drop due to embezzlement.

In addition, assets can fall due to huge losses incurred from stock market investment, he added.

Currently, there are 35 life insurance and 46 non-life insurance companies active in the country. Of them, 49 are listed with the stock market.

The insurance industry contributes only 0.4 per cent to Bangladesh's growing gross domestic product.