Insurance Sector of Bangladesh
Abu Sazzad: The share price of insurance sector of the country has abnormally increased by almost 250 percent during last 3 months but the business of the sector has decreased by 70 percent for the virus pandemic.
The abnormal growth of the share price of the insurance sector is posing threat for ensuring the security of the general investors’ money, said experts. They have underscored the need for scrutinizing the real fact behind the abnormal growth of the share price for securing the investment of the capital market. Vested quarters are involved to manipulate the share price deliberately for attracting general investors to encourage more investment as well as planning to plunder the investment from capital market, they predicted.
From the beginning of the current fiscal, the share price of most of the insurance companies increased significantly when the share price of other sectors witnessed a nominal growth. Such absurd share price growth created a doubt among the experts because the business of the insurance companies severely affected from virus pandemic.
According to a Daily Industry report, concentrating the virus pandemic, country’s insurance sector is still facing severe hardship to operate the normal business activities accordingly, mainly due to poor premium collection and drastic fall of investment income.
Actually, the insurance premium is the main income source of the companies, but it dropped by at least 70 percent in the recent months, affecting the sustainability of the companies as well as increasing the risk management of national asset. The life insurance policy holders were unable to repay their premium for acute financial crisis. On the other hand, stakeholders were failed to open non-life general insurance policy for recognizing the sluggish export and import activities.
Under this circumstance, the abnormal growth of the share price is almost impossible, said capital market experts adding that it may be visible for looting money from capital market.
However, according to Dhaka Stock Exchange (DSE) data, some insurance companies share price marked over 200 percent during June to September period in the ongoing fiscal 2020-21. Such absurd growth is suspicious because the traditional and strong stocks gained the highest 20 percent price growth.
The per share price of the Paramount Insurance was Tk 37.60 in May this year, but now, the price stood at Tk 147 as on October 15. Riding on this data, it may be said that the share price of the said company increased by 291 percent.
Industry insiders said, the history of paying dividends of Paramount Insurance is not very pleasant, even though the share price has skyrocketed. In 2018, the company paid investors a 5 percent bonus share dividend from the profit.
Meanwhile, the share price of the Asia Pacific General Insurance has increased over 250 percent in the last three months. The company declared 10 percent dividend in the year 2018 and 2019.
On the other hand, the share prices of general insurance companies increased by 75 percent after reopening market in June following the virus pandemic crisis. Besides, the share price of the banking sector witnessed 22 percent growth during the corresponding period.
According to DSE, the overall turnover from insurance stocks jumped to Tk 2,504.73 crore in August which is around 13.45 per cent of total market turnover. Such amount was Tk 1,030.39 crore in July that disclosed that turnover of insurance stocks increased 143 percent just within one month.
Dr Md Bokhtiar Hasan, President of Finance and Banking Department of Islamic University also expressed his doubt for raising the abnormal share price of the insurance sector.
As there is no reason for the unusual share price growth, he said adding that it is very much likely that gambling has acted as the short-term catalyst behind the sectors growth.
He urged the Bangladesh Security Exchange Commission (BSEC) for analysing the matter to ensure the investment security of the capital market.
The role of capital market is important to maintain the steady growth of the country, but such irrational growth is posing threat on investment, he mentioned.
Mohammad Rezaul Karim, BSEC spokesperson agreed that the share price of the insurance companies increased significantly, but is not a matter of concern because we are aware on this. Professor Shibli Rubayat Ul Islam, Chairman of BSEC vowed to develop country’s capital market and we are performing our responsibilities to prevent any irregularities as well as to protect the interest of the investors. He hoped that the commission will be able to identify the people involved in any manipulation.