Regulator directs MetLife to boost capital five times

The insurance regulator has instructed MetLife Bangladesh to raise its paid-up capital by almost five times to Tk 350 crore in a move to safeguard the interests of its policyholders.

At the end of 2015, MetLife's paid-up capital stood at Tk 72 crore.

The Insurance Development and Regulatory Authority asked for the increased paid-up capital to be reflected in its 2015 accounts.

Accordingly, it instructed the insurer to retain Tk 93.36 crore from each of its past three years' earnings.

MetLife Bangladesh is the only insurer to have been asked to raise its paid-up capital. None of the local insurers have been asked to do so.  “MetLife only has a branch office in Bangladesh. It does not have a full-fledged company like the local ones that have assets,” said Shefaque Ahmed, chairman of the IDRA.

Ahmed said the IDRA arrived at the figure of Tk 350 crore using its new solvency margin rules, which will come in effect in four to six months' time.

In the insurance sector, the solvency margin translates into its ability to pay. It is Basel I/II/III for the banking sector.

The solvency margin ratio measures a life insurance company's ability to pay out claims when unforeseen events occur, such as a natural disaster or a stockmarket collapse.

Once the new solvency margin rules come into effect, the other insurers will have to raise their paid-up capital too.

MetLife has been informed in advance so that it does not have to go through the hassles of bringing in additional capital from its headquarters in New York.

“We have advised them to retain earnings to help them avoid the hassles of bringing the additional capital from its headquarters once the solvency margin rules are in effect,” Ahmed said.

Meanwhile, MetLife Bangladesh had applied to the IDRA for an approval to remit over Tk 104.02 crore and Tk 114.7 crore from its 2014 and 2013 earnings respectively to its owners in the US.

The IDRA instead has asked the life insurer to retain Tk 186.72 crore to meet its new paid-up capital requirement and remit the remaining amount. The letter also instructed MetLife to retain the same amount from its 2015 earnings.

“We have to follow the regulator's instructions. We are working on it,” said Munirul Islam, head of brand and communications of MetLife Bangladesh.

MetLife has been doing business in Bangladesh since 1952. It is the leading life insurance company in the country, with close to 1,000,000 insured members and over 12,000 agents.

The company's market share (premium) is over one-fourth of the total industry's premium.