Term Paper

Topics: Insurance, Investment, Financial services Pages: 15 (4647 words) Published: April 26, 2013
World Journal of Social Sciences Vol. 2. No. 7. November 2012 Issue. Pp. 37 - 47

Investment Portfolio of Insurance Companies in Bangladesh: A Study on Selected Insurance Companies of Bangladesh Quazi Sagota Samina 1
Insurance companies are such financial institutions which stand by us at our disaster moments and try to uphold us by providing a lump sum amount of claim. To accelerate this important role in the economy, insurance companies involve in different investments so that they can earn a good profit. And here comes the importance of the construction of an efficient investment portfolio. Researchers like Oyatoye & Arileserre (2012) have focused to the importance of investment by insurance companies. On the other hand some have identified factors influencing the structure of investment portfolio. The insurance companies in Bangladesh from their inception are investing in different financial assets. This paper analyzes the structure of investment portfolio of different general insurance companies of Bangladesh and tries to focus to the cause effect relationship between the structure of investment portfolio and profitability of insurance companies in Bangladesh. To fulfill the objectives this paper considers cases of 13 general insurance companies operating in Bangladesh. Data has been collected from the annual report of the sample companies and from the Yearbook published by the Bangladesh Insurance Association. The findings show that the general insurance companies mainly concentrate toward Share investment where usually they do the investment through private placement and also they invest in government securities which they usually do as a part of statutory requirement and safety purpose. 1

Keywords: Insurance companies, investment.

1. Introduction
Insurance industry consists of such financial institutions which help us to be protected from a variety of perils. Not only in Bangladesh rather throughout the world, insurance industry has evolved as an important sector of the financial system side by side the banking industry. This industry helps the business sector as well as individuals more extensively than the banks. Because if one takes a loan at necessity of fund from a bank, in exchange one will have to pay a higher value for that including interest. On the other hand, in case of an insurance company, the policyholder gets a larger amount as claim against any loss covered at the time of real trouble in exchange of a small payment in the form of premium. Feyen & Rocha (2011) states that the insurance sector helps pool risk and reduces the impact of large losses on firms and households—with a beneficial impact on output, investment, innovation, and competition. The authors further indicates the insurance sector’s role in the improvement of the efficiency of other segments of the financial sector, such as banking and bond markets, by enhancing the value of collateral through property insurance and reducing losses at default through credit guarantees and enhancements. 1

Quazi Sagota Samina , Assistant Professor, Department of Business Administration, East West University, Bangladesh, e-mail: qss@ewubd.edu


Arkell (2011) states that insurance industry plays a more fundamental role in underpinning the working of a modern society, being a necessary precondition for many activities. The premium collected by the general insurance companies is mainly used to settle down the claims for different incidents covered under the insurance policies. This part of the premium usually insurance companies keep in their bank accounts in the form of FDR as well as STD account. A part of premium income the companies use for making payment of reinsurance premium. And a part companies use for investment purpose. So among the various uses of premium, investment is the only utilization which provides positive income in future for the company. Different insurance companies have investment in different sectors to get...

References: Arkell Julian, 2011, ‘The Essential Role of Insurance Services for Trade, Growth & Development’, International Association for the Study of Insurance Economics, Geneva Association, Geneva, http://www.genevaassociation.org/ Haq Nurul, 2008, Globalization and its impact on insurance industry of Bangladesh, Financial express, Malik Hifza, 2011, ‘Determinants Of Insurance Companies Profitability: An analysis of insurance sector of Pakistan’, Academic Research International, ISSN: 22239553, Volume 1, Issue 3, November 2011 Oyatoye Emmanuel Olateju & Arilesere Waheed Oladimeji , 2012, ‘A non-linear programming model for insurance company investment portfolio management in Nigeria’, International Journal of Data Analysis Techniques and Strategies 2012, Vol. 4, No.1 pp. 83 - 100 me 1, Issue 3, November 2011 Oppenheimer, HR & Schlarbaum, GG 1983, ‘Investment policies of propertyliability insurers and pension plans: A lesson from Ben Graham’, The Journal of Risk and Insurance, vol. 50, no. 4, December, pp. 611–630. Raihan Khaled, 2008, Insurance industry in Bangladesh: a rater’s perspective, Financial Express, 2008, Rejda GE, Principles of Risk Management and Insurance, Adison-Wesley, 1998 Tamzid, Masud & Rownak, 2007, ‘Perceptions Of The Customers Towards Insurance Companies In Bangladesh-A Study Based On The Survqual Model’, BRAC University Journal, Vol. IV, No. 2, 2007, pp. 55-66
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