The local life and non-life insurance businesses must maintain a higher-than-required amount of paid-up capital today more than ever to better secure depositors’ money as Bangladesh, like many other countries, is experiencing economic difficulties.
However, the truth is very different. According to unaudited data from the Insurance Development and Regulatory Authority (IDRA) for 2021, 34 of the 79 such organizations failed to maintain the minimum amount of capital needed by law.
19 of these businesses are life insurance companies, and 15 are not. The minimum paid-up capital required by the Insurance Act of 2010 for a life insurance company is Tk30 crore or Tk40 crore for general insurance firms. Sponsors and directors will contribute 60pc of the money, with the remaining 40pc being available to all investors.
The amount of an organization’s paid-up capital that is reliant on equity financing to fund operations. Given a company’s operations, business model, and current industry norms, this number can be compared to its debt level to determine whether it has a healthy balance of finance.
When asked for their opinions, a number of insurers that had fallen short of the minimum paid-up capital requirement stated that having little paid-up capital does not affect them and that it is standard practice in Bangladesh’s insurance industry.
Additionally, they claimed that raising the paid-up capital would cause them problems because of their poor performance in the premium market caused by higher fees. 81 insurance companies operate in the nation at the moment. 46 non-life insurance companies and 35 life insurance companies are among them. By 2020, Tk49,293 crore would have been invested in the industry, which directly employed 40,575 people. In the industry, there are about 42,673 agents at work.
