Marine insurance slump hits non-life insurers

The non-life insurance sector in Bangladesh is reeling under the combined weight of the ongoing economic slowdown and the dollar crisis.

During the July-September quarter, a significant portion of general insurers witnessed a year-on-year drop in profits.

Industry insiders attribute the downturn primarily to the disruption of marine insurance, a major revenue stream for non-life companies.

Insurer clients' inability to secure letters of credit (LCs) due to the dollar shortage has severely hampered business in this crucial segment, they added.

Furthermore, the sluggish performance of the capital market in recent years has deprived most insurers of positive returns on their investments.

They said widespread violations of the Insurance Development and Regulatory Authority's (Idra) agent commission rules have resurfaced, with many insurers offering excessive commissions of 30-40% to attract business.

This practice is severely undermining the operations of branches outside of Dhaka and Chattogram, leaving them struggling to secure clients, they continued.

Moreover, the marine insurance sector has experienced a staggering 50% decline due to the drop in LC openings.

Forty non-life insurers have released their disclosures for the July-September quarter, revealing that 60% reported a drop in profit, 35% witnessed an increase, and 5% remained unchanged.

Throughout the quarter, insurers reportedly faced challenges in obtaining positive results from motor insurance.

Khawja Manzer Nadeem, chief executive officer of United Insurance, laments the severe decline in the marine insurance business, attributing it to the rampant practice of flouting Idra's agent commission rules.

He warns that if this trend persists, local branches of insurance companies may be forced to close down.

Forty non-life insurers have released their disclosures for the July-September quarter, revealing that 60% reported a drop in profit, 35% witnessed an increase, and 5% remained unchanged.

Bangladesh Bank data for the July-October period indicates an 11.52% decrease in LC opening, declining to $21.82 billion from $24.66 billion in the previous fiscal year.

Notably, consumer goods experienced a 39.06% drop, capital machinery 20.75%, intermediate goods 21.47%, and industrial raw materials 16.12%.

Typically, general insurers offer services covering fire, marine, engineering, motor, and miscellaneous areas.

Pragati Insurance saw a substantial 78% drop in earnings per share due to declining premium income and increased claims.

The company's net profit after tax stood at Tk2.48 crore, compared to Tk11.07 crore in the same period the previous year.

Islami Commercial Insurance reported a 69% year-on-year profit decline, attributing it to significant drops in the motor and marine businesses.

Additionally, Eastland Insurance, Rupali Insurance, Meghna Insurance, and Paramount Insurance recorded profit declines of 57%, 55%, 54%, and 54%, respectively, during the quarter.

Presently, Bangladesh's insurance sector comprises 81 companies, with 35 in life insurance and 46 in non-life insurance. Among them, 57 companies are listed on the stock exchanges.

Experts have long emphasised that Bangladesh remains one of the most untapped insurance markets in terms of penetration rate.