Trust Islami Life Insurance Limited may face a significant blow to its business sustainability due to a high claims ratio and low re-insurance percentage, which are both major financial risks for the company. EBL Securities has reported that the insurer’s claims ratio was on an upward trend in the past five years, with an 18.3% ratio in 2021, up from 2.2% in 2017. Furthermore, the low re-insurance percentage, at only 0.7% of the gross premium during H1 2022, suggests a high business risk for the company.
The company’s net premium generated and the balance of the life insurance fund is lower than other listed life insurers, indicating that the company’s depth and size of business are materially lower than peer firms. The company’s small surplus in its life insurance fund in H1 2022 poses a risk of an actuarial deficit for the company in the future. However, Trust Islami Life Insurance Limited had an increase in its life insurance fund in Q3 2022, reaching Tk 6.4 crore, almost double the Tk 3.4 crore in the same quarter of the previous year. The insurer received approval from the BSEC to raise Tk 16 crore through an IPO under the fixed price method and intends to invest 20% of the fund in the secondary market, which is expected to have a positive impact on the company’s total income. Around 80% of the life insurer’s revenue comes from Ekok Bima, which has two components: the first-year premium and the renewal premium
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