Express (August 10, 2011)
Fourteen insurance companies -- six life and eight non-life -- will soon float their initial public offerings (IPOs) as confusion over their required minimum paid-up capital has been removed, thanks to the intervention by the Ministry of Finance (MoF), official sources said.
The minimum paid-up capital requirement for an insurance company, be it life or non-life, has been set at Tk 75 million by the finance ministry, which was earlier set at Tk 300 million for life and Tk 400 million for non-life by both securities regulator and Insurance Regulatory Authority (IRA) for the insurance companies concerned.
Both Securities and Exchange Commission (SEC) and IRA refused to accept the IPOs of insurance companies concerned several times since February, this year for their failure to meet the enhanced paid-up capital, a finance ministry official said.
The size of an IPO of an insurance company will be equivalent to 60 per cent of its required total paid-up capital (Tk 75 million) and the remaining 40 per cent will be subscribed by its sponsor directors, the official added.
Finance Minister AMA Muhith on Tuesday approved a proposal of Banking and Financial Institution Division, MoF, in this respect. The Division on the same day directed SEC to act as per the latest directives.
The insurance companies willing to go public could not float their IPOs for the last one year amid refusal by SEC and IRA on the ground of minimum paid-up capital criteria, Bangladesh Insurance Association (BIA) Chairman Sheikh Kabir Hossain told the FE.
"Following the directives from the finance ministry, there exists no bar to floating IPOs of 14 companies," he added.
The eight non-life companies are -- Meghna Insurance, Bangladesh National Insurance, South Asia Insurance, Islami Commercial Insurance, Express Insurance, Crystal Insurance, Union Insurance and Desh Insurance.
The six life insurance companies are -- Homeland, Sunflower, Padma, Sunlife, BAIRA and Golden Life Insurance Company.
A high official in the SEC said they had actually refused the IPOs of a number of interested companies as they followed the provision of Insurance Act, 2010, which specified the enhanced minimum paid-up capital criteria for life and non-life insurance companies.
He, however, said now the SEC would not object to flotation of IPOs of insurance companies on the ground of enhanced paid-up capital after the decision coming from the MoF.
A top official in the Banking and Financial Institution, MoF, said the SEC and IRA mis-interpreted the paid-up capital issue of Insurance Act, 2010. Elaborating, the official said clause No.'21' of the Act has exempted the insurers that existed prior to the enactment of Insurance Act from complying with the enhanced paid-up capital requirement.
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