British insurance giant eyes Bangladesh

After the Life Insurance Corporation (LIC) of India, British insurance giant Prudential has set its sights on Bangladesh.

A team of Prudential has already visited Bangladesh to explore business opportunities here.

“Prudential has expressed interest in Bangladesh. We will write to them next week asking for further talks,” said M Shefaque Ahmed, chairman of Insurance Development and Regulatory Authority or IDRA.

The paid-up capital of the proposed joint venture will be a minimum of Tk 100 crore.

IDRA has agreed to offer Prudential a controlling stake of 58 percent, with 2 percent stakes for local sponsors.

The remaining 40 percent shares will later be given to stock market investors through an initial public offering.

“Prudential's entry into Bangladesh will benefit the overall insurance industry. There will be knowledge transfer.”

Prudential has emerged as a leading international life insurer in Asia with operations in 14 markets, serving the emerging middle-class families of the region's outperforming economies.

The company serves over 2.5 crore insurance customers and has assets worth over $753 billion as on June 30. There are 32 life insurance companies in Bangladesh. Yet, insurance penetration remains one of the lowest in the world, with just 0.7 percent of gross domestic product.

Insurance penetration, measured as a percentage of premiums to a country's GDP, is nearly 3.5 percent in India.

The average insurance penetration stands at 6.2 percent globally, according to Zurich-based reinsurer Swiss Re.

The lone foreign insurer in Bangladesh, MetLife Alico, has been operating here since 1952. LIC is now all set to enter the market early next year.  Last year, two Japanese insurers had shown interest, but later backtracked due to more exacting conditions for foreign companies looking to enter the market through joint ventures with local partners.

Local entrepreneurs need a minimum of Tk 30 crore to form a life insurance company, while the amount is at least Tk 100 crore for a joint venture company, according to IDRA rules. IDRA wants the foreign insurance firms to own at least 50 percent of the total paid-up capital of Tk 100 crore in a joint venture company. But Japanese firms had wanted to have less than 50 percent stakes, according to IDRA officials.