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
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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.
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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
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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
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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.
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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%
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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.
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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
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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