A number of insurers counting penalty for not floating IPO

A number of insurance companies are counting significant amount of financial penalty every year for having failed to float IPO.
Officials of the Chief Controller of Insurance (CCI) said more than a dozen insurers are yet to float initial public offerings (IPOs).
Most of these companies have already applied to the Securities and Exchange Commission (SEC) for permission to float IPO, they mentioned.
Some of those have reportedly failed to comply with the IPO floatation guidelines while dilly-dally of the SEC is also responsible for the delay in floating IPO by some other companies, the officials added.
According to rule each of the non-listed insurance companies requires to pay Tk 1,000 as fine per day for missing their respective IPO floatation deadlines.
Normally, the CCI realises such financial penalty at the time of renewing their operating licences, especially at the end November every year.
"No insurance company can obtain any new policy without the renewal of their operating licences," said a CCI official.
The official also informed the FE that the CCI had realised about Tk 47.40 million in fine from the errant insurers till November 31, 2008.
A total of 60 private insurance companies - 43 general and 17 life - are in operation in the country.
According to rules, the official said, the private insurance companies are required to mobilise at least 60 per cent of their required paid-up capital through IPO.
The CCI official said the floatation of IPO has been made mandatory for the insurance companies to make them operationally sound through raising their capital base.
Another important objective of the provision is to boost the country's capital market, sources said.
Presently, life insurance companies require a minimum paid-up capital of Tk 75 million to run their operation, while it has been fixed at Tk 150 million for general insurers.
But the capital base of several companies is still below the required level, they mentioned.
Besides, the authorities have already proposed raising the paid-up capital to Tk 300 million for life insurance companies and Tk 400 million for non-life insurers in the proposed Insurance Act 2009, which now awaits parliament's nod.
According the Insurance Bill, which has been placed in the House, the insurers have been given a five-year time period to enhance their capital base, it was learnt.