Proceedings of 13th Asian Business Research Conference 26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1 Economic Growth (Investment Portfolio) of Conventional Insurance Sector: Chapter Bangladesh Shahriar Parvez and Jahanggir Alam Akand Insurance companies are such financial institutions which stand by us at our disaster moments and try to uphold us by providing a lump sum amount of claim. To accelerate this important role in the economy, insurance companies involve in different Insurance investments so that they can earn a good profit. And here comes the importance of the constructing of an efficient Insurance investment portfolio. On the other hand some have identified factors influencing the structure of Insurance investment portfolio. The conventional insurance companies in Bangladesh from their inception are investing in different financial assets. This paper analyzes the structure of conventional Insurance investment portfolio of different general insurance companies of Bangladesh and tries to focus to the cause effect relationship between the structure of Insurance investment portfolio and profitability of insurance companies in Bangladesh. To fulfill the objectives this paper considers as a partial empirical study by cases of 13 conventional insurance companies operating in Bangladesh. Data has been collected from the annual report of the sample companies and from the yearbook published by the Bangladesh Insurance Association. The findings show that the conventional insurance companies mainly concentrate toward Share Insurance investment where usually they do the Insurance through private placement and also they invest in government securities which they usually do as a part of statutory requirement and safety purpose. Originality: Viewpoint/ General Review JEL Code: G20; G22 Keywords: Conventional Insurance, Minimization, Policy Holders. Financial Institution, Gross Premium, Risk Introduction: Insurance is nothing but a system of spreading the risk of one on to the shoulders of many. Whilst it becomes somewhat impossible for a man to bear by himself cent percent loss to his own property or interest arising out of an unforeseen contingency, insurance is a method or process which distributes the burden of the loss on a number of person within the group formed for this particular purpose (Chaudhuri, 2004). Conventional Insurance is a risk transfer mechanism with carrying the core principles such as Insurable Interest (the insured typically must directly suffer from the loss. Insurable interest must exist whether property insurance or insurance on a person is involved), Utmost good faith (the insured and the insurer are bound by a good faith bond of honesty and fairness. Material facts must be disclosed), Proximate cause (the cause of loss (the peril) must be covered under the insuring agreement of the policy, and the dominant cause must not be excluded), Indemnity (the insurance company indemnifies, or compensates, the insured in ________________________________________________________________________ Md. Shahriar Parvez*, Assistant Professor, Department of Business Administration, City University, Bangladesh. Email Address: msparvez_educator@yahoo.co.uk. *Corresponding Author (Md. Shahriar Parvez) Jahanggir Alam Akand, Administrative Officer, Sandhani Life Insurance Company Ltd. Bangladesh. International contract: 0088-01932786146 1 Proceedings of 13th Asian Business Research Conference 26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1 the case of certain losses only up to the insured's interest), Contribution ( insurers which have similar obligations to the insured contribute in the indemnification, according to some method), Subrogation (the legal doctrine whereby one person takes over the rights or remedies of another against a third party), Mitigation (in case of any loss or casualty, the asset owner must attempt to keep loss to a minimum, as if the asset was not insured). Thereby the individual or the business enterprise can shift some of the uncertainties of life on the healthier, comfortable and easy life to meet this requirement different enterprises produce and provide goods and services, large responsibility falls on the shoulder of innovators and inventors. A small error or lapse may cause numerous side effects and cause death or disability. These types of risks highlight the importance of insurance. If there had not been insurance at the back of all innovators the world would have never progressed. After assuring this in security factor the enterprises started looking for new and more hightech machines robots and gargets, atomic technology, space traveling computers, deep sea exploration, development of concords and jumbos and medical technology for hydro hear led diseases. All these developments could be possible with support of insurance. In peace the conventional insurance provides protection to trade and industry, which ultimately contributes towards human progress. Thus insurance is the most lending force contributing towards economics, social and technological progress of man. Without insurance cover all industrial, economic and social activity of the world will come to a grinding halt. An insurer, by nature, tries too split and diversify its risks in many ways a very important way is to split them horizontally and vertically within reinsurance companies and horizontally to their competitors. Conventional Insurance industry consists of such financial institutions which help us to be protected from a variety of perils. Not only in Bangladesh rather throughout the world, insurance industry has evolved as an important sector of the financial system side by side the banking industry. This industry helps the business sector as well as individuals more extensively than the banks. Because if one takes a loan at necessity of fund from a bank, in exchange one will have to pay a higher value for that including interest. On the other hand, in case of an insurance company, the policyholder gets a larger amount as claim against any loss covered at the time of real trouble in exchange of a small payment in the form of premium. The insurance sector helps pool risk and reduces the impact of large losses on firms and households—with a beneficial impact on output, Insurance investment, innovation, and competition. The authors further indicates the insurance sector’s role in the improvement of the efficiency of other segments of the financial sector, such as banking and bond markets, by enhancing the value of collateral through property insurance and reducing losses at default through credit guarantees and enhancements that insurance industry plays a more fundamental role in underpinning the working of a modern society, being a necessary precondition for many activities. The premium collected by the general / conventional insurance companies is mainly used to settle down the claims for different incidents covered under the insurance policies. This part of the premium usually insurance companies keeps in their bank accounts in the form of FDR as well as STD account. A part of premium income the companies use for making payment of reinsurance premium. And a part companies use for Insurance investment purpose. So among the various uses of premium, Insurance investment is the only utilization which provides positive income in future for the company. Different insurance companies have Insurance investment in different sectors to get income from their Insurance investment. In Bangladesh general insurance companies have achieved a good growth in spite huge competition in the sector and there is huge scope for the insurance companies in the country. However with the expansion of general / conventional insurance industry, companies in this industry are involving themselves in several Insurance investment activities. Problem Statement: From the growth of overall size of Economy, it is difficult to identify the significance of specific sector. Proper nurturing of significantly contributory sector, the growth of Economy may be resisted. 2 Proceedings of 13th Asian Business Research Conference 26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1 Previously there was no difference between Insurance and Products. Insurance concept is the modern issue in the world. The most of the business is related to Insurance. Even the product itself provides the Insurance to the customers. So the Insurance is the vital issue now. The economic sectors classified by Bangladesh Government are Hotel and Restaurant, Retail trade and Wholesale trade, Transportation and Communication, Real estate and Renting, Financial Institution, Public Administration and Defense, Education, Health and Social Insurance , Community and Personal Insurance are included under Insurance Sectors. So they occupy a major share of total economic sectors. As a result, importance of Insurance is significant. For Economic development we always think regarding industry and agriculture sectors rather Insurance sectors. But major sector in the economy is Insurance sector. In the modern world, Insurance is required in every phase of life. People expect better Insurance our public sectors. Including public enterprises are largest sectors in the economy. But these sectors are losing concern. The public sector is unable to provide competitive Insurance. So, people go to private sectors such as financial institutions, transportation, hospitals, educational institutions, and communication media for better Insurance. But the growth rate of Insurance sectors is either below expected level or not as per its importance in the economy. From this research the problems of Insurance sectors are identified. For increasing the living standard of the people the Insurance concept has come to lime light. Insurance marketing and Insurance management will get the importance to develop the Insurance sectors in Bangladesh. The research aims are to analyze the comparative contribution of Insurance sector with other sectors, the impact of trade liberalization of Insurance sector and to provide the recommendations for development of Insurance sector. Objective of the Study: The study mainly tried to focus on the growth and investment portfolio of conventional insurance Companies in Bangladesh. Which more specifically To have an idea about the insurance industry of Bangladesh. To observe the growth in general insurance industry of Bangladesh. To find out the structure of Insurance investment portfolio of selected insurance Companies in Bangladesh. To find out the determinant factors of financial trend Insurance investment portfolio. Methodology: This research has used Primany and mostly secondary data have been used for analysis. Data have been collected from Bangladesh Economic Survey report, Bangladesh Bureau of Statistics report, Bangladesh Bank and Internet web sites, Books, Newspapers, Magazines and Journals and Data collected from sandhali life, popular life, progressive life insurance company ltd. We have used required data for ten years from 2000-01 to 2009-10 for analyzing the contribution of economic sectors, growth rate of each sectors viz. Insurance, industry and agriculture. Method Used This paper discusses about the financial trend analysis of selected general insurance companies and life insurance Company of Bangladesh. So about the sample companies we identified the trend of financial Insurance investment portfolio by taking average data. Also to get the growth rate of insurance industry, we used the average value and to get the proportion of Insurance investment we used the ratio method. Literature Review: An extensive literature has been developed regarding the financial trend analysis of insurance companies. Janowicz-Lomott (2011) describe the role of insurance management as to manage the 3 Proceedings of 13th Asian Business Research Conference 26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1 funds generated by the insurance business, maximizing risk adjusted returns while meeting regulatory requirements on its assets and other financial constraints. The author further states that insurance management must ensure that Insurance returns preserve the solvency, both regulatory and economic, of the insurance company, earn the return commensurate with the use of its capital and enable it to continue to underwrite profitable insurance business. Oyatoye & Arileserre (2012) states that as it is crucial for insurance industry to survive and develop. The insurance investment enables insurance companies to offset their possible underwriting losses and make a considerable profit. Mukati (2012) states that the risk faced by an insurance fund manager differs from what the typical fund manager faces because of the fact that the risk in insurance investment management must factor in the liability side of its balance sheet that includes benefit amounts from shareholder capital as well as the reserves that are necessary for the insurer future claims. Lambert & Hofflander (1967) argued that the most important single factor affecting the Insurance investment portfolio decision of property liability insurance companies is liquidity i.e. the readily available fund to make payment of the claims of the policyholders. They also identified that income from Insurance investment is a requirement by the stockholders as they get dividend from it. Cummins & Nye (1981) presents a model to assist property liability insurance companies in making product and Insurance investment mix decision. Steinle& Eggers (1994) shows how strategic planning can benefit an insurance company’s decision. Hobbs et. Al. (2010) examines strategies to protect insurance companies’ Insurance investment portfolios against potential inflation scenarios. Oyatoye & Arileserre (2012) offer alternative solution to portfolio Insurance investment management by implementing best processes for minimizing the risk for a given expected return, which is generally a nonlinear function considering the scenario of Nigeria. Worzala et. Al. (1996) explores the use of real estate in Insurance investment portfolios of large property/casualty and life insurance companies in the U.S. In Bangladesh different authors have analyzed different aspects of insurance industry of the country. Raihan (a financial analyst) has measured the performance of insurance industry both for life insurance and general insurance in terms of corporate governance, business profile, risk management, performance level, solvency and liquidity. Raihan states that the significant portion of the Insurance investment portfolio of insurance industry is usually kept with different banks as FDR under different maturity bucket which serves the purpose of liquidity. Tamjid, Rahman and Afza (2007) put light regarding the reasons behind non popularity of insurance in Bangladesh. Nurul Haq (2008) describes how the trend of globalization may create new dimension of challenges for insurance industry. But the structure of Insurance portfolio of these insurance companies was not discussed under those studies. So this paper focuses on this area of Insurance portfolio structure of general insurance companies in Bangladesh as the Insurance portfolio of insurance industry has been given emphasized in different studies. Insurance Industry in Bangladesh: Bangladesh has a history of insurance industry aging about a century. Before liberation about75 insurance companies including 10 locally incorporated ones had insurance business in East Pakistan. After liberation, all the insurance companies of this area were nationalized under the control of five insurance companies through Bangladesh Insurance Order 1972. In 1973 government decided to separate the two major sectors of insurance- life insurance & general insurance. So at that time government formed Jiban Bima Corporation to take over the undertakings of life insurance activities & Shadharan Bima Corporation to deal with general insurance activities. As the single state-owned institution to handle all types of general insurance business in Bangladesh, Sadharan Bima Corporation did 100% of the business until 1984. Through the Insurance (Amendment) Ordinance 1984 and Insurance Corporations (Amendment) Ordinance 1984, the government allowed operation of insurance companies in the private sector. In 4 Proceedings of 13th Asian Business Research Conference 26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1 1990, the government further allowed private sector insurance companies to underwrite 50% of public sector business and the remaining 50% was kept reserved for Sadharan Bima Corporation. Private insurance companies were also given option to insure 50% of their re insurable business with any local or foreign insurance companies. SBC distributes 50% of all public sector insurance businesses to private general insurance companies on an equal basis. Recently some more changes have been incurred in the insurance industry of Bangladesh. The circular (No: 21/21/98-376 dated March 12, 2007) of the Chief Controller of Insurance regarding mandatory credit rating for the insurance companies is considered to be the most effective breakthrough in the sector. According to the direction, all insurance companies were instructed to get credit rating with effect from 2007. Although the rating of insurance companies is a new phenomenon in the rating industry in Bangladesh, it experienced tremendous response from the market participants including the insurers themselves. Many of the good rated insurance companies, particularly upper Insurance investment grade entities, started using the rating as a ‘marketing tool’. They are also trying to improve their position based on report of the rating agencies. The age old insurance laws have been replaced with Insurance Regulatory Authority (IRA) Ordinance 2008 and Insurance Ordinance (IO) 2008. The Department of Insurance will be abolished by the five member Insurance Regulatory Authority headed by the Chairman not below the rank of Government Secretary. To improve the solvency position of this industry, the paid up capital for general and life insurance companies have been raised to TK. 400 million and TK. 300 million respectively. According to the new law the insurance companies will have to ensure international accounting standard, have to separate Islamic insurance from conventional ones and need to put a limit on commission expenses. With the promulgation of the ordinances, the insurance industry will be under the Ministry of Finance from the Ministry of Commerce. Hopefully all these steps taken by the regulatory authority will make the industry stronger and the companies sustainable in the long run. At the recent time some changes have been made in the insurance industry of Bangladesh to accelerate the development and efficiency of this sector. Growth of Conventional Insurance Industry in Bangladesh: After the inception of the general insurance industry of Bangladesh in private sector in 1984, a good number of insurance companies have been emerged in the small economy resulting in a competitive position. In general insurance sector, private insurance companies came into the economy in three phases- in 1985, the first group of insurance companies (16) started functioning, in 1996, the second group (8) and in 2000, the third group of general insurance companies (19), total 43 companies. But this quantitative growth does not necessarily shows qualitative development. The presence of too many companies, 43 general and 17 life, apart from two corporations-- one for general and another for life -- and one multinational life company in a small market has given rise to all the unethical practices and maladies retarding the growth of the industry in the past decades. The rate of annual growth in life insurance is 25-27% in our country but the per capita insurance and the population coverage by insurance policy is too low compared to our neighboring countries like India & Pakistan and off course much lower compared to the developed countries. The contribution of this sector to GDP is even less than 0.1%. The scenario is not enhanced in case of general insurance industry. They have an annual growth of about 12-13%. They also have too many problems which are hindering the development of this sector. Table – 01 Average Financial Growth Rate of Private Insurance Industry of Bangladesh Average Growth Over years Growth from 1999-2009 5 Proceedings of 13th Asian Business Research Conference 26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1 Gross Premium 14.31% Underwriting Profit 22.30% Insurance investment 19.38% Income from Insurance 20.36% investment Total Asset 15.79% Source: Bangladesh Economic Review, 2010 – 11 279.24% 365.57% 470.07% 457.33% 316.34% The gross premium of the private general insurance companies has an average growth rate of 14.31% over the year 1999 to 2010. If we compare the amount of gross premium directly from 1999 to 2010, we get an increase in the gross premium of279.24%. The underwriting profits of the companies have increased on an average at 22.30%. Now if we look at the scenario of Insurance investment made by the companies, it is observed that the industry has increased their Insurance investment activity at 19.38% whereas income from Insurance investment has increased by 20.36%. The size of the industry which is reflected through the total assets has an average increment of 15.79%. Portion of Investment Portfolio of Conventional Insurance Company: As this paper is mainly concerned about the Conventional Insurance Company’s investment activity of general insurance companies in Bangladesh, in this part focused on the Insurance investment proportion of general insurance industry under private sector from the year 1999 to 2010. Table – 02 Portion of Investment Portfolio of Conventional Insurance Company Year 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Insurance investment 2239.23 3194. 84 3655. 25 4488. 33 5100. 14 5667. 79 6611. 11 7220. 89 8571. 40 1113 2.41 1276 5.15 1710 Total Asset 7848.59 9178. 11 9868. 34 1032 6.73 1114 5.68 1266 6.7 1419 9.72 1581 5.53 1982 9.68 2275 6.46 3267 6.63 3336 Proportions of Insurance investment 0.28530 3 0.348 093 0.370 402 0.434 632 0.457 589 0.447 456 0.465 58 0.456 570 0.432 251 0.489 198 0.390 651 0.512 7.37 8.62 678 Source: Bangladesh Economic Review, 2010 – 11 Proportion of Insurance investment reflects the amount of Insurance investment as well as the amount of total assets possessed by the private general insurance companies from 1999 to 2010. With the help this information we calculated the proportion of Insurance investment which shows that proportion of Insurance investment made by the industry has increased gradually over the years. Whereas the industry invested only 28.53% of total assets in 1999 they accelerate their Insurance investment activity in 2000 to 34.8% of total assets. In 2010 the industry involved 51.26% of their total assets for Insurance investment purpose. Based on the annual report of the sample general insurance companies, we observed the financial asset items in which these insurance companies have invested. In this case one thing to be noted that this paper focuses only towards the general insurance companies and in general insurance companies the policy is made for one year tenure, so these companies invest their fund mainly in short term instruments or instruments which are marketable means easily sellable in market. 6 Proceedings of 13th Asian Business Research Conference 26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1 After analyzing the annual reports, we found the following instruments in which the sample companies invest more or less: Govt. Securities: As government securities general insurance companies mainly invest in National Insurance investment Bonds. This is a risk free Insurance investment for them as well as this instrument is very liquid. Moreover insurance companies get involved in these instruments as a part of fulfillment of govt. statutory requirements. Corporate Debt Instruments: Besides the govt. securities, general insurance companies do involve in Insurance investment in corporate debt instruments. They invest in debentures, corporate bonds etc. Minority Ownership: Insurance companies which are under a holding company, sometimes invest in other subsidiary companies. But such ownership has a minor proportion. Share: Like govt. securities, most of the sample general insurance companies invest in shares of different companies. Most of this share Insurance investment is done through private placement. A very less percentage of the total share Insurance investment is done through stock exchange. v. ICB Debenture: Some general insurance companies invest in the debenture issued by the Insurance investment Corporation of Bangladesh. Table – 03 Structure of Insurance investment Portfolio Company Govt. Sec. Corporate Debt Instruments Green Delta 0.27% 0.66% Reliance 2.32% 2.51% Insurance Pioneer 4.15% Phoenix 4.16% Insurance Asia Pacific 15.27% Pragati 99.74% Insurance United 2.18% Insurance Company Peoples 12.43% Insurance Company Central 18.22% Insurance Mercantile 19.91% Insurance Company Eastern 1.08% 0.67% Insurance City General 23.08% Insurance Eastland 1.49% 3.42% Insurance Source: Bangladesh Economic Review, 2010 – 11 Minority Ownership 10.52% 60.29% Share ICB Debenture 83.01% 95.18% 95.86% 35.21% 84.73% 0.06% 0.20% 97.83% 87.57% 80.51% 80.09% 98.24% 76.93% 95.10% 7 Proceedings of 13th Asian Business Research Conference 26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1 The above table shows that the sample general insurance companies have two basic streams of Insurance investment first is the govt. securities and the second one is the share. Except Pragati General Insurance Company, all the other companies have the main sector of Insurance investment as shares (mainly through private placement). However to some extant every company invests in govt. securities mainly as a risk free Insurance investment and also to meet up the statutory requirement. Besides, four insurance companies out of 13 companies invest in corporate debt instruments, two have Insurance investment in minority ownership and only one has Insurance investment in ICB debenture. In case of minority interest Phoenix Insurance Company has major Insurance investment in this sector. Analysis: The Contribution of Insurance Sector: Off all the sectors, Insurance sector is prominent one. Insurance sector has the growing potential to be driver of sustainable economic growth and significant poverty alleviation in Bangladesh. Insurance sector in Bangladesh is the largest sector. It is observed that the contribution of the Insurance sector is average 49.33%. It is steady over the period. The contribution of Insurance sectors is 48.77% in 2000-01 and 49.90% in 2009-10. Demonstrates contribution of different sectors in GDP. The growth rate of Insurance sector is steady. The average growth is 6.17%.The growth rates are 5.43%, 6.40%, and 6.59% in 2001-02, 2005-06, and 2009-10 respectively. Growth of Sub-sectors of Insurance Sector: Growth rate of Insurance sector is consistent and continuous. it is shown that the four sub sectors – (i) Trade (ii) Transport, storage and communication (iii) Real Estate renting and other Business activities (iv) Community, social and personal Insurance contribute more in GDP which are14.06%, 10.07%, 7.98%, 7.39% respectively. But the growth rate is more for the Education, Banking, Public administration, Transportation which are 8.42%, 8.13%, 7.88%, 7.48% respectively. Comparative Analysis of Insurance Sector with Agriculture and Industry Sector: From the comparative presentation of the sectors, it is found that Insurance sector is sustainable in terms of growth and contribution to total GDP. It is shown that the average contribution of Insurance sector, industry and agriculture sectors are 49.33%, 28.42%, and 22.25% respectively. So, the Insurance sector is the half of total sector of economy. The growth rate of Insurance sector, industry sector, and agriculture sector are 6.17%, 7.49%, 3.21% respectively. Here, from the figure-2, it is seen that the contribution of Insurance sector is steady. The contribution of industry sector is increasing with the reducing trend of agriculture sector. Here, apparently it is seen that the average growth rate of Insurance sector is more the agriculture sectors and the total GDP growth and the average growth rate of industry sector is slightly more than the Insurance sector. Now we shall statistically test whether the average growth rate of Insurance sector is more than the agriculture sectors and total GDP growth and whether there is significant difference of growth rate between Insurance sectors and industry sector. Recommendation: After analysis, it can be said that the contribution of Insurance sector is about 49.22% and the growth rate of Insurance sector is 6.175%. The contribution is about half of the total economic sectors and the growth rate is more than the average growth of GDP. Emphasis is given on the Insurance sector for development. Since the industry sector is growing rapidly (7.49%), support can be given by providing the quality and smooth Insurance. The employment in Insurance sector is increasing day by day. So, there is lot of opportunity for employment in this sector. 8 Proceedings of 13th Asian Business Research Conference 26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1 It is a good symptom for us. So we have to emphasize the Insurance export such as Tourism, Software, Transportation and Financial Insurance etc. The prospects of some promising Insurance sectors are pointed out below. Quality Financial Insurance Financial Insurance is another important part of total Insurance sector in Bangladesh. It is a promising sub sector which consists of the Bangladesh Bank (the central bank), four nationalized commercial banks (NCBs), 5 state owned specialized banks (SBs), more than 30 private sector commercial banks (PCBs) and more than 9 foreign commercial banks (PCBs). The rest of the financial sector consists of more than 29 non-bank financial institutions, the capital market, 3 general and 17 life insurance companies, the cooperative banks and the microfinance institutions. Development of Tourism Tourism is one of the most promising sectors for Bangladesh with her huge natural beauty, heroic historical background and archaeological resources. Bangladesh is a country of natural beauty. She has lot of tourism places. These places are of different interest like beaches, historical places, archaeological sites, religious palaces, forest and jungle etc. Development of Software and IT With the passage of time, the globe is being changed from analogue to automation. During last few years Bangladesh showed enormous success in Software and IT Sector which can enlarge the extent of her Insurance market (BASIS 2010). The current size of Bangladesh IT Industry and software/ITES industry is still smaller compared to the overall economy and the number of population (over 150 million). Over the last few years the industry has been grown considerably and is expected to grow at that rate for some time. Information Communication Technology (ICT) With the hope of great development, the government of people republic of Bangladesh introduced National Information and Communication Technology (ICT) Policy in October 2002. This policy document guides the development of a country-wide ICT-infrastructure for human resources development, governance, e-commerce, banking, public utility Insurance s and all sorts of on-line ICT-enabled Insurance s by 2006. Improvement in Transportation Transportation is an important sub-sector of total Insurance sector. It includes different type of transport for example road transport, waterways, railways, and airlines. Of these, road transport is mostly used means of transport. Road transport in Bangladesh is a private sector affair operating predominantly in domestic routes. Development of Education sector For increasing of people and literacy rate, the demand of higher education is increasing. The technical institution, Business education, health education create the demand to the people. The development of government and private universities is the indicator of growing demand of education sector. Conclusion: Insurance Companies serve a very important role in the economy by extending helping hands towards the distress people at the time of their necessity. For this reason besides commercial banks, insurance companies have become an essential ingredient of the financial system. There are two wings of insurance companies among which one category is the general insurance companies. These companies help people against different perils like fire incident, incident in the marine way, motor accident, aviation incident, natural calamity etc. However besides the regular dealings of general insurance companies, they occupy in Insurance with a part of their premium collection. Different general insurance companies invest in different sectors. This paper focused on the scenario of Bangladesh general insurance industry. After liberation in 1971, the industry passed through certain phases and 9 Proceedings of 13th Asian Business Research Conference 26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1 has achieved a good growth though the contribution of this industry to economic development is not that much remarkable. The number of companies has grown rapidly which has created a huge competition in the industry for which the companies have found Insurance investment as one of their income source. After analyzing the Insurance portfolio of general insurance companies in Bangladesh, it is found that the sample companies mainly invest in two financial instruments, i.e. government securities and shares. Besides, they also invest in corporate debt instruments, minority ownership and ICB debenture to some extent. However the proportion of Insurance by the general insurance companies in Bangladesh has increased substantially which may induce the companies to move for some more diversified portfolio. However this paper considered the case of only 13 general insurance companies out of 43 private insurance companies. So the small sample size may be a limitation of the study. So to omit this limitation more companies can be taken into consideration and a vast analysis can be done in this regard. Reference: Bangladesh Chief Controller of Insurance Circular dated March 12, 2007. Bangladesh Parjatan Corporation n.d. SUNDARBAN Royal Bengal Tiger and Mangrove Forest accessed 2 May 2011, www.parjatan.gov.bd/forest.php Bangladesh Association of Software and Information Services 2010, BASIS Resource Center, Bangladesh, accessed 2 May, 2011, http://www.basis.org.bd/index.php/resource Elements of Insurance, by Chauduri, A.H (2004), Published by Bangladesh Insurance Academy. June, 1981, Reprint: 2004. Ministry of Finance (2010), Bangladesh Economic Survey 2010, Ministry of Finance, Dhaka. Mamun, Z.( 2004) "Performances of Some Selected Non-Government General Insurance Companies of Bangladesh Compared to Government Insurance Company", Journal of Business Administration, Institute of Business Administration, University of Dhaka, Bangladesh, Vol. 30, No. 1 & 2, pp. 1-18. Mamun, Z.( 2002) ,”Performance Evaluation of the Private Life Insurance Companies of Bangladesh: A Private-Public Comparison", Journal of Business Administration, Institute of Business Administration, University of Dhaka, Vol. 28, No. 1 & 2, pp. 27-56. http://www.crab.com.bd. http://www.crislbd.org/entity_ratings. Appendix: Contribution of total service sector in GDP Trade (Retail & Whole sales Hotel & Restaurants Transport, Storage & Communication Banking & Insurance Real Estate, Renting & other Business Activities 20002001 20012002 20022003 20032004 20042005 20052006 20062007 20072008 20082009 20092010 28021 29868 31687 33770 36155 38596 41700 44543 47309 49816 1335 1427 1527 1635 1751 1881 2023 2176 2341 2519 19579 20863 22292 23676 25552 27592 29809 32357 34949 37464 3270 3489 3722 3983 4338 4707 5139 5596 6099 6608 18096 18715 19374 20068 20801 21569 22381 23221 24106 25033 10 Proceedings of 13th Asian Business Research Conference 26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1 Public Administration and Defense Education 5322 5637 5932 6351 6860 7420 8044 8543 9142 10505 4651 5004 5384 5798 6256 6822 7433 8013 8658 9624 Health and Social Work Community, Social and Personal Services 4548 4789 5059 5371 5768 6217 6693 7163 7678 8373 16538 17073 17640 18340 19082 19863 20733 21731 22753 23832 Total Service 101360 106865 112617 118992 126563 134667 143955 153343 163035 173774 Source: Bangladesh Economic Review, 2010-11 Contributions and growth of sub sectors Std. of Std. of Service sub-sector Service Service sub-sector sub-sector growth Trade (Retail & Whole 7526.08 0.75 sales Hotel & Restaurants 398.47 0.29 Avg. Contribution % Avg. of subsector total Avg. of subsector growth 14.06% 38146.50 6.60 0.68% 1861.50 7.31 Transport, Storage & Communication Banking & Insurance 6109.71 0.80 10.07% 27413.30 7.48 1140.47 1.04 1.72% 4695.10 8.13 Real Estate, Renting & other Business Activities Public Administration and Defense Education Health and Social Work 2336.93 0.14 7.98% 21336.40 3.67 1678.77 2.85 2.71% 7375.60 7.88 1647.75 1289.33 1.17 1.17 2.48% 2.27% 6764.30 6165.90 8.42 7.02 Community, Social and Personal Services Total 2471.01 0.58 7.37% 19758. 50 4.14 24576.02 0.54 49.33% 133517.10 6.17 Source: Bangladesh Economic Review, 2010 The following is the list of the rated insurance companies up to the month of February, 2008: Assigned Date Name of Insurance Companies Rating Name of Credit Rating Company General Insurance Companies 14.2.2008 10.2.2008 3.2.2008 3.2.2008 30.1.2008 Northern General Insurance Co. Ltd Prime Insurance Co. Ltd Federal Insurance Co. Ltd Asia Pacific Insurance Co. Ltd Eastern Insurance Co. Ltd BB+ BBB BBBBB1 A CRISL CRISL CRISL CRAB CRISL 11 Proceedings of 13th Asian Business Research Conference 26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1 23.1.2008 17.1.2008 17.1.2008 14.1.2008 14.1.2008 1.1.2008 30.12.2007 30.12.2007 30.12.2007 18.12.2007 18.12.2007 18.12.2007 4.12.2007 20.11.2007 15.11.2007 15.11.2007 28.10.2007 9.10.2007 24.11.2007 15.7.2007 12.7.2007 12.7.2007 31.5.2007 25.10.2005 22.8.2005 21.6.2005 25.4.2005 City General Insurance Co. Ltd Mercantile Insurance Co. Ltd Islami Commercial Insurance Co. Ltd Purabi General Insurance Co. Ltd Paramount Insurance Co. Ltd Phoenix Insurance Co. Ltd Global Insurance Co. Ltd. Crystal Insurance Co. Ltd Standard General Insurance Co. Ltd Takaful Islami Insurance Co. Ltd. Central Insurance Co. Ltd Bangladesh National Insurance Co. Ltd. Dhaka Insurance Ltd Reliance Insurance Co. Ltd South Asia Insurance Co. Ltd Republic Insurance Co. Ltd Nitol Insurance Company Ltd. Continental Insurance Ltd. United Insurance Company Ltd. Pioneer Insurance Company Ltd. Bangladesh General Insurance. Co. Ltd. (BGIC) Green Delta Insurance Co. Ltd. Pragati Insurance Ltd. Asia Pacific Insurance Ltd. Central Insurance Company Ltd. Bangladesh General Insurance Co. Ltd. (BGIC) Eastland Insurance Co. Ltd. BBB BBB+ BBB BB2 BBB3 A BB1 BB2 BB3 BB1 BBB1 CRISL CRISL CRISL CRAB CRAB CRISL CRAB CRAB CRAB CRAB CRAB BB1 CRAB BBB+ CRISL CRISL A+ BB1 BBB3 A CRAB CRAB CRISL BBB CRISL A CRISL A CRISL CRAB BBB1 AA2 CRAB AA2 CRAB BBB CRISL BBB- CRISL CRISL BBB BBB CRISL 12 Proceedings of 13th Asian Business Research Conference 26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1 29.12.2004 30.10.2004 Bangladesh General Insurance Co. Ltd. (BGIC) Green Delta Insurance Co. Ltd. CRISL BBB A CRISL Life Insurance Companies 30.1.2008 14.1.2008 27.12.2007 27.11.2007 13.10.2007 11.10.2007 19.9.2007 Pragati Life Insurance Co. Ltd. Sunflower Life Insurance Co. Ltd. Meghna Life Insurance Co. Ltd. Fareast Islami Life Insurance Co. Ltd. Shandhani Life Insurance Co. Ltd. Rupali Life Insurance Company Ltd. Popular Life Insurance Co. Ltd. A+ CRISL BB3 CRAB A CRISL A+ CRISL A3 CRAB BBB- CRISL A- CRISL 13