Surviving the present challenges is a compelling worry of the weak. Winning in the aftermath is a compulsive thought for the courageous!

Dear Valued Members,

Green Delta Insurance’s planning and preparation over the past few years, executed with a tremendous sense of resolve, has demonstrated the intended benefits that have begun materializing, which is encouraging as the world begins its cautious return to normalcy. The company has performed well amid the challenging operating conditions of the year and now we are preparing to stabilize operations to thrive in the post- pandemic environment, charting our path to an exciting future.

Achieving growth, substantiating our purpose

Coming off a relatively high base last year, Green Delta Insurance delivered growth across all its key financial metrics. This is especially note worthy considering the unexpected events experienced, both locally and globally, over recent years, with COVID earlier and now the war in Europe. It is extraordinary how quickly we were able to re- set and deliver another excellent performance, while continuing to entrench the deep focus and attention directed toward all the parameters and aspects relevant to our businesses and the way we operate.

Indeed, the sound performance of the Group in the most recent financial year gone by is a reflection of the calibre of the leadership and executive team and the dedication and commitment of more than 500 employees who come to work every day to deliver operational excellence. They’ve maintained Green Delta Insurance’s track record of providing long-term value to customers we’ve built relationships with and have also performed with a sense of excellence to grow our clientele during the year.

We continue to work hard to ensure the company’s principles, values, and the outcomes arising from the ESG framework, are judged on their respective effectiveness, and the ability of the business to fulfil its purpose.

Delivering a good result is one thing but, at Green Delta Insurance, we believe we are only performing satisfactorily if we deliver beyond the financial statements and provide benefit to our broader base of stakeholders. We are doing this remarkably well, specifically in terms of providing for sustainable employment generation, supporting employee transformation and contributing to those in need, while also delivering on pledges made to all other social and environmental ambitions. One can only say that success has been achieved when you deliver on commitments, made through a clearly defined purpose, and which provide benefit to people, the planet, and ultimately result in a strong performance. We have ticked all the boxes and our charged to continue to deliver on our commitments in the future.

It is also pleasing that Green Delta Insurance made good progress on reducing its environmental footprint through many efforts such as a reducing paper and energy consumption, improving social and community wellbeing, while also being able to offer customers more innovative and sustainable products and services. Ultimately, ensuring a better future for all our stakeholders.

World economic overview

For the world economy and polity, the year 2022 has been a challenging period. It had begun with promise, with COVID waning and fairly strong economic recoveries registered during 2021 in most large economies from the pandemic’s ravages in the prior year. Thus, the IMF has forecasted global growth to slow down from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023. This is the weakest growth profile since 2001, except for the global financial crisis and the acute phase of the COVID-19 pandemic.

Early in 2022, inflation surged in the US and some European economies, triggering an almost synchronized tightening of monetary policies after many years of loose accommodative stances. Inflation and the associated monetary tightening was aggravated by the Russian invasion of Ukraine towards the end of February 2022, which sent energy, food and fertiliser prices soaring and spawned widespread supply disruptions that were, in turn, compounded by unprecedented economic sanctions imposed on Russia by an increasingly united US-led western alliance.

A few months down the road, supply chains were also hit by outbreaks of Omicron in China, triggering strong lockdown in major cities. Higher interest rates and uncertainties of war sucked capital into the US in a predictable ‘flight to safety’, leading to a sharp appreciation of the US dollar which heightened external financing challenges and caused debt distress in a large number of developing nations, including Bangladesh.

As a result of these multiple shocks, global economic growth slumped below 3% in 2022. Further, abrupt dismantling of the ‘zero-COVID’ policy in China by the government after public furore against the stringent lockdowns and isolation rules, the toughest in the world, has caused a sense of panic with fears of re-return of COVID. This will complicate economic recovery and will further add to the uncertain and complex global geopolitical and socioeconomic environment.

Bangladesh overview

Bangladesh has been an island of hope amid the choppy seas. The country has powered economic growth by linking its demographic dividend to global supply chains, especially for readymade garments (RMG). The basis of the country’s export success story has been pinned to the advantages of low-cost labour and a progressive upshift in the value addition chain.

On almost every parameter, Bangladesh has stood out. From being one of the world’s poorest nations at independence in 1971, the country has reached middle-income status and is headed to exit the United Nations’ Least Developed Countries list by 2026. Poverty has declined from 43.5 percent in 1991 to 14.3 percent and its human development indicators outstrip most of its peer countries, especially in terms of women’s workforce participation and empowerment.

However, from this steady trajectory of export prosperity till just 2 years ago, the country faced the balance of payments crisis, forcing it to approach the International Monetary Fund for a US$ 4.5 billion bailout package, the third South Asian nation to do so in the recent past. The government has attributed the pandemic and the Russian invasion of Ukraine for the sharp economic downturn that has crimped global demand and has seen a surge in inflation adding to the challenges of the ordinary citizen.

Going forward, stable institutions, improving social security system, implementation of the rule of law, and general good governance all means that Bangladesh can be considered an environment conducive to business investment that can stabilise the economy in the long run. Furthermore, Bangladesh has real opportunity as global supply chains became circumspect of the business climate in China and look to diversify in the ‘China+1’ gameplan.

Bangladesh’s economy is expected to grow by 6.5 percent in fiscal year 2022-23, as per World Bank estimates, making it amongst the fastest developing countries of the world, even as there are broad proclamations that almost one-third of the world will be in recession by this time.

Going strong: Portfolio update

Health premiums picked up again in 2022 after slight moderation in growth, thus contributing to the expansion of Bangladesh’s non-life insurance industry. Health premiums grew by 138 percent in 2022, driven largely by group health plans that have seen good growth attributable to the rationalisation of discounts in premiums caused by adverse claims ratios in prior periods, medical inflation, and enhanced coverage. Notwithstanding a higher base and lower growth rates compared to 2021, the health segment is anticipated to witness continued demand amid increased awareness after COVID-19 and rationalization of discounts.

On the other hand, motor premium which was subdued for most of the pandemic, are seeing healthy growth in 2022 owing largely to the lower base of last year, the repricing of motor third-party premiums, and relatively better vehicle sales. Motor premiums at our company expanded by 6 percent during the year under review as compared to the prior year. Notably, the long-term growth patterns of motor insurance would be driven by growth in the automotive industry, which would increase penetration among uninsured vehicles on the road.

The other major segments of the general insurance industry that reported growth are marine at 2 percent, fire at 13 percent, and miscellaneous at 16 percent in 2022 vs last year.

The non-life insurance industry of Bangladesh earns premiums of roughly about Tk. 4,500-5,000 crore. With the pandemic’s impact easing and with improving investment yields, profitability is anticipated to improve as the loss ratio of the health sector moderates. However, some caution is sounded as inflation, the war in Europe, China’s rising COVID caseloads, and slowdown in the domestic economy continue as risks to growth in Bangladesh.

Mitigating risks facing our business to advance our objectives

With the protracted pandemic after-effects in 2022 and the war in Ukraine that triggered a deterioration in the macro-financial landscape of Bangladesh, the Company continued to monitor key risks and minimising negative impacts through effective risk response.

In the face of a slowing economy, we focused on enriching and transforming our portfolio mix, focusing on those segments of the market where we have a traditionally strong presence and looking to recalibrate our premium rates to make up for overall cost increases. Furthermore, we also bolstered our engagement with our customers, looking to enhancing our relationship through constant dialogue and improving our solutions capabilities. In addition, slow take up of insurance and historically low insurance penetration are key risks facing the future of not just the enterprise, but also the sector as a whole.

Towards this extent, we devise many ways for enhancing insurance inclusion and ensuring customer outreach by focusing on accessing every corner of the country. We share an everlasting belief in insurance for all and all our product and distribution strategies are focused on this lens.

At our Company, the important aspect of our risk management is not to completely avoid risk but to minimise negative effects and focusing on positive upsides for delivering sustainable value and growth.

Insurance and our contribution to the Sustainable Development Goals

The demand for insurance was born out of a desire to safeguard one’s assets against the possibility of loss due to calamity. Sustainable, resilient and inclusive development is the bedrock of the safety of people and their possessions.

The pandemic is a prime example of how sudden economic shocks can halt development efforts. It has been estimated that 119-124 million ‘new poor’ have been created in 2020 as a result of COVID-19, according to the World Bank. Nonetheless, nations with more robust safety nets are doing better.

SDGs such as no poverty, reduced inequalities, zero hunger, good health and well-being, gender equality, decent work and economic growth, industry innovation and infrastructure, climate change, and partnerships for goals all benefit from insurance as a risk protection mechanism. Five of the SDGs benefit from insurance in an indirect way, including quality education; industry, innovation, and infrastructure; reduced inequalities; partnerships for the goals; and sustainable cities and communities.

With the 2030 Agenda and the SDGs on the horizon, the insurance sector, one of the world’s major financiers, has the opportunity to contribute to sustainable development. The industry acts as a risk underwriter, investor and corporate citizen, depending on the situation, and at Green Delta Insurance we are all of this and more.

We have always held the opinion that companies that effectively handle environmental, social, and governance (ESG) challenges are more likely to create shareholder value, improve their reputation, and significantly contribute to socioeconomic sustainability. Hence, we are focusing on developing an ESG-compliant business model through the following initiatives:

Financial risk assessment/ underwriting

The shift toward a cleaner future can be aided by including climate-related risks in underwriting and investing rules. As an insurance company, we evaluate decisions around providing our services to industries in the negative list, such as those that pollute the environment. We continuously assess our risk appetite and the kind of risks we are willing to take in order to incorporate ESG into our underwriting cycle.

Eco-friendly products

It is clear that ESG variables have had an effect on the development of health and life assurance packages. Leading insurers have begun offering sustainable insurance products and have established fund management principles to only make investments in companies with strong records in environmental, social, and governance responsibility.

Determining our ESG risk appetite

Long-term prosperity requires establishing a framework or risk appetite for environmental, social, and governance risks. Although some ESG event-based incidents are covered by typical insurance policies, as insurers we will need to get inventive in order to fill the widening protection gap created by the many ESG trend-based hazards that are emerging. I believe that insurance companies can better comprehend the sensitivity of the balance sheet to changes in significant ESG risk factors if they identify which industries are most relevant and risk-prone to the business.

As Green Delta Insurance has shown, the insurance sector has an opportunity to set the standard by demonstrating how ESG can be integrated into overall industry strategies rather than treated as a tick-box exercise.

Inflation, cost-of-living crises, challenged energy markets, reversal in interest rates, pandemic exhaustion, political uncertainty and what is likely to be seen as accelerating impact of climate-induced events have all set the stage for the new year 2023.

Climate change risk and the path to net-zero, growing existential threat of biodiversity loss, socioeconomic disparities, enhanced regulations and, more recently, debate on what exactly ESG should be, are all large- scale issues that organizations will need to contend with. Simultaneously, the very concept of ESG is also being scrutinized as it becomes increasingly political, even as regulators all over the world ramp up their inspection of everything, from greenwashing to demanding tougher disclosures of climate targets. Common reporting standards such as the TCFD (Task Force on Climate-Related Financial Disclosures) are emerging as well-accepted frameworks being harnessed by organizations to disclose initiatives that reduce their businesses’ impact on the environment and help them burnish their sustainability credentials amongst the investor and regulatory community and the wider society.

Cybersecurity preparedness amid a vulnerable scenario

Financial institutions are 300 times more vulnerable to cyberattacks than any other industry, and the cost of remediating a cyberattack is 40 percent more than any other industry, as per a recent study. It has been time and again proven that one of the main reasons for malicious attacks entering a financial network is for financial gains.

Growing cyberattacks across the finance world as well as businesses in general is making companies more aware for the need of security, including Green Delta Insurance. We are cognisant of the incipient requirement for high preparedness amid a cyber risk-prone industry environment. When it comes to the insurance and financial services industry, there is a lot of vulnerable information that malicious players can have access to, such as individual users’ data, etc.

In the face of this environment, at the company we have been very nimble and agile in terms of adopting cyber security. Thus, proactively building for change is an ingrained practice and today, we are overhauling legacy systems and incorporating modern technology in a bid to not just thwart cyber crime but also ensure the right kind of preparedness for the future. Our new platform is not only much more stable but also enables us to ensure the progressive handling of a larger number of customers and hence be ready for future growth.

Going forward, we believe regulations could play a strong role in stewarding the insurance industry to create a sort of a more robust and institutionalized framework that would also ensure greater insurance penetration and hence remain central to the theme of insurance for all.

Forward outlook

As I conclude my comments, I would like to convey our deepest sympathy and compassion to all those affected by the tragic war taking place in Ukraine. We really hope for an early and peaceful resolution to the conflict.

Even if the worst of COVID is hopefully behind us, we face a global environment which is the most unsettled we have experienced for a number of years. We can, however, take comfort from the strength and enduring appeal of our business as one that is a counterpoint to risk and, by its intrinsic nature, provides stability against exigencies.

Green Delta Insurance’s Tk. 1,303 mn net cash position at the end of December 2022 is a source of strength as we face volatile times ahead. I am confident that the company and group are well-positioned to benefit from any strengthening in insurance demand. We will work to maintain the necessary agility and flexibility to manage global uncertainties. We have survived the pandemic and are now reviving the business for ensuring that it thrives in the aftermath of the war and the pandemic.

Finally, I would like to thank all our colleagues across the group for their solid contribution to our satisfactory performance delivered in 2022 with solidarity, empathy, creativity, agility and responsibility. We have seen virtually all our business lines improve and made major strides in our sustainability agenda. We consider ourselves custodians of shareholder and stakeholder trust and through our multi-stakeholder approach we will formulate strategy and take decisions that are in the best long-term interests of all. Our focus will of course be on value creation for today and tomorrow.

I would like to reiterate how important it is for us to build brand equity over time, and to do it in a responsible manner, even as we strive to bridge the huge gap in insurance in Bangladesh in the ethos of marching with the time and within the spirit of providing insurance for all.

Thank you very much, dear stakeholders!

With warm regards,

Farzanah Chowdhury
Managing Director and CEO