Economic crisis, war take a toll on non-life insurers
The global economic crisis, fuelled by the Russia-Ukraine war, appears to have hit the non-life insurance sector hard, as most insurers experienced year-on-year declines in their profits for 2022.
Twelve of the 42 publicly listed general insurers have published their annual performance. Eight of them witnessed declines, while only four posted year-on-year growth.
Industry people blame the sluggish business of insurance companies on a combination of factors – declining imports, a stock market slowdown, the resumption of agents' commissions, and higher reinsurance costs.
Usually, general insurers provide services to their clients in the following areas: fire, marine, engineering, motor, and miscellaneous.
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As Covid restrictions eased, the insurance business bounced back and the stock market became upbeat. But then the prolonged Ukraine war, global economic instability, and high inflation happened and the insurance business, along with other businesses, slowed down.
In the first six months of 2022, non-life insurers did good business in the marine sector, but in the second half of that year, the business declined by 20-30% because of difficulty opening Letters of Credit (LCs) due to the dollar crisis, an industry insider said.
How the firms fared
At the end of 2022, the profit of Paramount Insurance Company Ltd declined by 38% to Tk7.60 crore, from Tk12.32 crore in 2021.
Zharna Parul, company secretary at Paramount Insurance, told The Business Standard, "The company's collection of marine insurance premiums decreased because of LC opening hardships. Also, the company incurred a significant loss from investing in stocks, which in turn impacted its business negatively."
Asia Insurance's net profit declined by 36.5% and stood at Tk9.84 crore in 2022, which was Tk15.49 crore in 2021.
A senior official of the company, who requested anonymity, said that the Russia-Ukraine war had a massive impact on the business, with higher reinsurance costs and declined imports shrinking the company's marine insurance business. Additionally, the insurance regulator's reinstatement of a 15% commission for agents negatively affected the company's business.
Green Delta Insurance reported a 13% year-on-year decline in its profit due to a decrease in profits and increase in claim expenses of subsidiaries. During the year, its consolidated earnings per share stood at Tk7.30, which was Tk8.43 a year ago.
In addition to the above, the profit of Takaful Islami Insurance dropped by 34%, that of Pragati Insurance dropped by 1.2%, Phoenix Insurance's by 8.2%, Pioneer Insurance's by 12.1%, and Sena Kalyan Insurance's profit fell by 25.35%.
On the other hand, the net profit of United Insurance Company Ltd increased by only 6%, riding on higher premium collection and interest income. The gross premium of the company stood at Tk58.57 crore in 2022, which was Tk54.33 crore in 2021. Consequently, the profit after tax stood at Tk7.79 crore, an increase from Tk7.35 crore in 2021.
Khawja Manzer Nadeem, managing director of United Insurance, said that the company did good business in marine insurance, essential products, garments, and pharmaceutical raw materials over the year. But it decreased by 20-30% due to the dollar crisis that began in July last year.
Currently, there are 79 insurance companies in Bangladesh's insurance sector, with 33 life and 46 non-life insurance companies. In total, 56 companies are listed on the stock exchanges, of which, 42 are non-life.
