Foreign insurers backtrack from Bangladesh entry

Two foreign insurance giants -- Prudential from the UK and Taiyo from Japan -- have backtracked on their plan to enter the Bangladesh market, according to the insurance regulator.

“Neither Prudential nor Taiyo has contacted us in recent months,” said M Shefaque Ahmed, chairman of the Insurance Development and Regulatory Authority.

Though the insurance market in Bangladesh is oversaturated with 74 companies -- 42 non-life and 32 life -- the market is heavily underdeveloped and poorly governed. Subsequently, the government and the regulator in March 2010 passed an insurance law to facilitate the entry of foreign insurers with a view to absorbing some of their knowledge and technical know-how.

After that, several foreign insurance companies, including Taiyo, LIC, Prudential and a Taiwanese insurer, had expressed interest in the Bangladesh market.

Taiyo got the consent letter from the IDRA in July 2013 to launch a life insurance company in partnership with Bangladesh's Summit Group, to be named Taiyo Summit Life Insurance Company.

At that time, the Japanese firm said it would hold a 57 percent stake in the proposed company, whose paid-up capital would be Tk 150 crore. Summit would have a 39 percent stake, an individual named Rashid 2 percent and Asian Future the other 2 percent.

Then in August 2014, Taiyo wrote to IDRA to express its intent to reshuffle Taiyo Summit Life Insurance Company's stakes, which is a violation of insurance regulations.

As per the revised proposal, Taiyo was to hold 19.9 percent stakes, Summit 60.1 percent, Rashid and the Asian Future 10 percent each.

Local entrepreneurs need a minimum of Tk 30 crore to form a life insurance company, whereas the amount is at least Tk 100 crore for a joint venture with a foreign company, according to IDRA rules.

IDRA wants the foreign insurance firms to own at least 50 percent of the total paid-up capital of Tk 100 crore in the joint venture company.

Later, Taiyo in a letter said if the IDRA does not give the go-ahead to its revised plans, it will have to withdraw from the investment, which it did.

On the other hand, Prudential started communication with the IDRA in 2014 and sent a team to Bangladesh in 2015 to explore business opportunities here.

Later, the insurer continued contact with the IDRA through a chartered accountant but the communication has totally stopped of late, according to IDRA.

“Prudential did not contact me in the last 3 to 4 months. Before that I did some work for them on an ad-hoc basis,” said a chartered account requesting not to be named.

Prudential is an international financial services group with significant operations in the UK, the US and Asia.

The situation has become uncertain due to the ongoing concerns about terrorist activities, he added.

So far, the only foreign insurer to have entered the Bangladesh market after the government changed the insurance law was Life Insurance Corporation (LIC) of India, while American MetLife has been operating here since 1952.