Top five companies dominate insurance sector­­

Five leading companies are controlling the country’s insurance sector. These companies hold the majority of the sector’s assets and premiums. A crisis in any one of these companies would pose a risk to the entire sector.

This information has been revealed by the latest financial stability report from Bangladesh Bank.

The report states that the dominance of these five companies has reduced competition within the insurance sector and created a systemic risk. Smaller companies are struggling to survive and the diversity of products and services is becoming limited.

The report notes that the total assets in the life insurance sector stand at Tk48,560 crore. The top five companies hold nearly 77%, or Tk37,357 crore, of these assets.

They also control over 65% of the premiums. The state-owned Jiban Bima Corporation alone controls 6.45% of assets and 7.01% of premiums in this sector.

In the non-life insurance sector, assets amount to Tk20,530 crore. The top five institutions control 62.67%, or Tk12,865 crore, of these assets and 56.02% of the premiums. The state-owned Sadharan Bima Corporation alone holds 42.17% of the assets and 27.10% of the premiums in the non-life sector.

Bangladesh Bank's report states that this excessive concentration of assets and premiums is limiting competition and increasing the sector's dependence on a few institutions.

Although the insurance sector operates independently, its financial activities are directly linked to banks, non-bank financial institutions, the capital market, and the bond market. Life insurance companies have invested nearly 63% of their funds in government bonds.

The amount of fixed deposits (FDRs) in banks and financial institutions decreased from 15.57% in 2023 to 13.25% in 2024. As these deposits constitute only 0.95% of the total bank deposits, a sudden withdrawal by insurance companies would not place significant pressure on the banking sector.

However, if a bank or financial institution were to collapse, the insurance sector could be severely affected. 10.59% of investments are in the capital market. The weak performance of the stock market directly impacts the earnings of the insurance sector.

The combined market capitalization of insurance companies listed on the Dhaka Stock Exchange decreased from 3.87% in 2023 to 3.53% in 2024. This means the insurance sector's influence on the stock market is limited, but its significant investments in the market mean that a downturn creates financial pressure on the sector.

According to analysts, the dominance of the top five institutions is creating an imbalance across the sector. A major crisis in any one of them could shake the entire industry. With a large portion of the market in the hands of a few institutions, new or smaller companies are struggling to compete.

This limits the diversity of services and products available in the market. Bangladesh Bank has already warned that the concentration and interconnectedness of the insurance sector make it vulnerable.

Without proper policies and strict supervision, the sector could soon face even greater risks, which would also call overall financial stability into question.