The tendency of non-life insurance companies to not follow rules in investment management is increasing day by day. An investigation by the Insurance Development and Regulatory Authority (IDRA) found that seven non-life insurance companies did not meet the minimum criteria for investment in government securities. According to the law, these companies are required to invest 7.5 percent of their total assets in government bonds, but most of them ignored this rule.
The companies are Eastern Insurance, Northern General Insurance, Islami Commercial Insurance, People's Insurance, Continental Insurance, Phoenix Insurance and Express Insurance Limited.
An investigation conducted in 2023 revealed that the concerned companies had been violating the law for a long time but continued to violate the rules due to lack of effective monitoring and punishment system. Experts say companies are to blame for this indifference, as is poor management by regulatory agencies.
According to IDRA's 'Non-Life Insurers Assets Investment and Preservation Regulations' 2019, every non-life insurance company has to invest a minimum of 7.5 percent of its assets in government securities or bonds. After investing in government securities, the rest of the assets of the companies can be invested in 9 sectors at fixed rates.
IDRA fined four insurance companies — Meghna Insurance, Dhaka Insurance, Crystal Insurance and Agrani Insurance — five lakh rupees and a total of two lakh rupees for violating the rules. These fines were imposed at various times in 2024 after IDRA's hearing with the companies.
According to the investigation report, according to the 2023 financial report, Eastern Insurance has not invested in government securities bonds; Which is completely against the rules. In this regard, the Chief Executive Officer (CEO) of Eastern Insurance Hasan Tarek said that there was no investment in government securities during the investigation. But now I have invested according to the law. There are now more investments than the investment limit prescribed in the regulation.
People's Insurance has invested Tk 11.26 crore in government securities; Which is 5.33 percent of the total wealth as a percentage. Continental Insurance has invested Tk 2 crore 50 lakhs in bonds; Which is 2.02 percent of the investment. Phoenix Insurance has invested Tk 2.5 crore in government securities; Which is 1.84 percent of the investable assets of the company. 50 lakh rupees investment in government securities bonds of Express Insurance; Which is 59 percent of wealth.
Northern General Insurance has invested Tk 16 crore 99 lakh in government securities bonds; Which is 6.43 percent as a percentage.
Apart from this, Islami Commercial Insurance has invested 58 million taka in government securities bonds; Which is 6.38 percent of the total investment. That is, no company has invested 7.5 percent in bonds.
When asked about the matter, Chief Executive Officer (CEO) of Islami Commercial Insurance, Kazi Mokarram Dastgir said, “We have now made necessary investments in government securities to fulfill the conditions of the investment rules as per the instructions of IDRA. However, as an Islamic insurance company, we must invest according to the guidelines of the Shariah Board. And Shariah-based investment is profitable for us.
Mukarram Dastgir said, as an Islamic insurance company, we have no opportunity to go for interest-based investments. But the current investment rules are forcing us to invest interest. We have reported this to IDRA, but as there is no Islamic Insurance Act, they are also unable to give us any guidance.
Experts in the insurance sector say that companies do not want to invest in government bonds for the long term despite the asset protection. So companies have been violating the law for years. This irregularity will increase day by day if the companies are not brought under heavy penalties. Regulatory bodies are responsible for this.
When asked about this, Director and Spokesperson of IDRA Jahangir Alam told Ajker newspaper that the inspection team visited the offices of the companies in 2023 to find out whether the investment in government securities is correct or not. The inspection shows the true picture of investment and management costs of the companies. It has been seen that the companies are doing various irregularities including breaking the rules of investment in government bonds. Bilateral hearings were held on irregularities. Subsequently fined for violating the investment provisions, the companies have paid the fines.
