14 insurance cos asked to submit application for IPO floatation

Fourteen insurance companies with low paid-up capital have been asked to submit applications to the Securities and Exchange Commission (SEC) to float Initial Public Offering (IPO), sources said.

A tripartite meeting at the Ministry of Finance (MoF) Thursday decided that the SEC, as the sole authority, will take decision relating to the listing of the companies in the bourses.

Thus the insurance companies will have to submit the applications accordingly and the SEC will decide under which act the companies will be listed.

Banking Division Secretary Shafiqur Rahman Patwari presided over the meeting attended by SEC Member Arif Khan, Insurance Development and Regulation Authority (IDRA) Member Ziaul Huq Mamun, Bangladesh Insurance Association (BIA) Chairman Sheikh Kabir Hossain, and BIA Executive Member Nasir Uddin Ahmed (Pavel).

Following the passage of the Insurance Act-2010 a dispute has arisen as to whether the insurance companies, which have started business under the Insurance Act-1938, will float IPO under the new act or not.

The Insurance Act-2010 has set the paid-up capital for life and general insurance companies at Tk 300 million and Tk 400 million respectively.

But the companies registered under the Insurance Act-1938 got approval with the paid-up capital for life insurance at Tk 75 million and general insurance at Tk 150 million.

According to the revised public issue rules, a company must have pre-IPO paid-up capital of Tk 180 million with the public offer of Tk 120 million in order to get approval for listing.

The new rules set that the minimum size of an IPO should be of Tk 120 million which means that a company having at least Tk 300 million paid-up capital, including the minimum IPO size, can be listed.

Six life insurance companies and eight general insurers are now facing the problem with the new rules coming into effect.

The life insurers which are facing the dilemma are Homeland Life Insurance, Sunflower Life Insurance, Padma Islamic Life Insurance, Sun Life Insurance, BAIRA Life Insurance and Golden Life Insurance.

The eight general insurance companies are Meghna Insurance, Bangladesh National Insurance, South Asian Insurance, Islami Commercial Insurance, Express Insurance, Crystal Insurance, Union Insurance and Desh General Insurance.

After the meeting Arif Khan told newsmen that considering the situation of the present share market 'we will try to approve listing of all the companies that apply'.

Sheikh Kabir Hossain told reporters: "We want the insurance companies to go public immediately since those are counting a fine of Tk 1,000 per day for failing to be listed in time."

He said the meeting has discussed that until the rules and regulations of the new act are set, the insurance companies will run under the previous rules and regulations.

The Financial Express, 29 July 2011