Raising Tk30cr through IPOs not mandatory for insurance companies: BSEC

The securities regulator has exempted 26 insurance companies from the securities rule to enable them to be listed on the stock market under the fixed price method.

Under the new facility, the insurance companies can apply to the securities regulator for initial public offerings (IPOs) aiming to raise less than Tk30 crore.

The lowest bar for raising capital through IPOs is now Tk15 crore for the insurance companies.

The Bangladesh Securities and Exchange Commission (BSEC) took the decision at a meeting at its office on Wednesday.

BSEC took the decision in response to the Insurance Development and Regulatory Authority of Bangladesh's (IDRA) application in this regard.

Previously, Finance Minister AHM Mustafa Kamal said all insurance companies in the country would have to be listed on the stock exchanges by the end of 2019.

He threatened to cancel licences of the companies that failed to comply with the directive.

However, the companies had no option to apply to the commission due to the obligation clause of amended public issue rules.

According to the amended public issue rules formulated by the commission, a company can only apply for an IPO under the fixed price method if it had posted a net profit after paying tax in the immediate past year, and has no accumulated loss.

Meanwhile, the Insurance Act requires insurance companies to go public by issuing primary shares, but the number should not exceed two-thirds of what their entrepreneurs hold.

Experts have been saying, for a long time, that Bangladesh is one of the most untapped insurance markets in terms of penetration rate. Awareness and a strong culture of insurance service behind economic activities can help the industry thrive.

Various steps are now being taken to address these issues.

According to the Dhaka Stock Exchange, most of the listed insurance companies – both in life and non-life sectors – are making profits and paying dividends to their shareholders at the year's end.

But some non-listed companies in both sectors are still struggling as a few of them are playing their due role to make the pie bigger by creating a new market.

Additionally, the majority of them are also struggling to acquire sufficient shares on the existing market.

Most of them are failing to limit their operational expenses within the regulatory threshold against their business volume and that is a concern for all, including the insurance regulator IDRA.