Fareast islami life sells vehicles, cuts jobs to reduce costs

Fareast Islami Life Insurance Company Limited is selling its vehicles and slashing its workforce in a desperate effort to cut costs and counter a deepening financial crisis.

As of December 2024, the company had outstanding insurance claims worth Tk 2,946 crore, of which it has settled only Tk 194 crore, according to data from the Insurance Development and Regulatory Authority (Idra).

In other words, the company has managed to clear around 6 percent of the claims.

The company, which currently has assets worth Tk 3,374 crore, has been mired in a financial crisis due to corruption and irregularities, which were unearthed through a regulatory audit in 2021.

However, the regulator has not taken any effective measures to resolve the situation.

Saifunnahar Sumi, the Idra's consultant for media and communication, recently said that the regulator had asked the company for a specific plan to settle claims, but they did not provide it.

Subsequently, the regulator instructed the company to start selling assets as soon as possible to settle the claims. Otherwise, further regulatory measures will be taken, she said.

Sumi also said the company has been instructed to expand its business and, given the current situation, this was an important issue for them.

By selling vehicles, relieving officials from their jobs, merging underperforming offices, and paying commissions as per regulations, the company has saved Tk 7.13 crore, as per company documents.

Additionally, by renting out five office spaces, the company has increased its income by Tk 1.77 crore, according to documents dated March 27.

Income falling short of liabilities

Md Kalim Uddin, the company secretary, told The Daily Star recently that a major challenge was the huge backlog of claims, adding that the current income was not sufficient to cover these liabilities.

"We are making continuous efforts to settle claims and resolve other issues," he said.

Due to the company's reputation turning sour, policy sales have nearly come to a halt, he said, adding that initiatives have been taken to sell several assets.

The prices of assets were inflated on paper through manipulation, due to which no buyer is willing to offer even the price actually paid by the company, he said.

Another issue is the current political situation. After the political changeover in August last year, a section of wealthy politicians went on the run. As such, finding buyers for large assets has become difficult, he added.

The company currently has 1.72 lakh policies. Policyholders cancelled 11,135 policies last year.

How did the company become so troubled?

In April 2021, the Bangladesh Securities and Exchange Commission (BSEC) appointed Shiraz Khan Basak and Company, a chartered accountant firm, to conduct a special audit of Fareast.

The BSEC commissioned the audit after receiving allegations that the insurer failed to meet customers' claims and make payments against policies that had matured.

As per the report, Tk 2,367 crore has been embezzled by high-ups. Apart from this, accounting irregularities amounting to Tk 432 crore were detected.

Nazrul Islam and MA Khaleque, former chairmen of Fareast, Hemayet Ullah, a former chief executive officer, and some former directors and senior officials were found to be involved in embezzlement.

The money was siphoned in mainly two ways -- purchasing land at prices higher than the market value and through bank loans availed by mortgaging the company's Mudaraba Term Deposit Receipt (MTDR).

The MTDR is a profit-bearing account based on the Mudaraba concept that offers returns on money deposited for a fixed period.

In September 2021, the BSEC dissolved the company's board and sacked CEO Hemayet Ullah.