Shanta Life Spent 1,396% above Allowable Limit, Faces Life Fund Deficit and Debt Burden

Abdur Rahman Abir: Shanta Life Insurance has come under scrutiny after financial disclosures indicated that the company spent substantially more than the regulatory limit during its first 13 months of operation, resulting in a significant life fund deficit and a growing debt burden. A review of the insurer's quarterly and annual financial reports shows that management expenses significantly exceeded premium income, raising questions about its financial sustainability and future ability to meet policyholder obligations.

According to the company's reported financial statements, Shanta Life earned total gross premiums of Tk 6.87 crore during its first 13 months of business operations but incurred management and operational expenses of Tk 21.36 crore. The expenditure amounted to 311 percent of total premium income and exceeded the allowable limit by 1,396 percent, based on the review.

The company also reported a life fund deficit of Tk 14.38 crore and outstanding loans totaling Tk 17.60 crore, while total assets stood at Tk 23.09 crore.

Industry experts note that a life fund is the primary financial reserve used by life insurers to meet future claims and policy benefits. A prolonged deficit in the fund can create financial pressure, particularly for a newly established insurer that is still in the process of expanding its business operations.

Expenses Far Exceeded Premium Income

Shanta Life obtained its insurance licence on November 7, 2023, and formally commenced business operations on December 1, 2024.

During the final month of 2024, the company collected Tk 44 lakh in premiums while reporting expenses of Tk 6.70 crore. In 2025, it generated Tk 6.43 crore in premium income and incurred expenses of Tk 14.66 crore.

Combined, the insurer spent Tk 21.36 crore to generate Tk 6.87 crore in premium income during its first 13 months of operation.

The financial statements show that salary and employee benefits alone accounted for approximately 161 percent of total premium income, while other administrative expenses represented a further 141 percent.

While some industry observers acknowledge that newly established insurers often incur higher expenses related to office setup, technology and infrastructure, insurance experts argue that such spending must remain within reasonable limits and comply with regulatory requirements. They caution that excessive early-stage expenditure can weaken the financial foundation needed to support future policyholder commitments.

Questions over Financial Reporting Consistency

The review also identified differences in management expense figures reported in various financial statements submitted by the company.

Shanta Life's fourth-quarter report showed management expenses of Tk 16.22 crore against premium income of Tk 6.43 crore in 2025. However, another report dated December 31 reported management expenses of Tk 13.98 crore for the same period.

The difference between the two figures amounts to approximately Tk 2.24 crore, or nearly 14 percent.

Meanwhile, the company's audited annual report showed management expenses of Tk 14.66 crore for the same premium volume.

As a result, three separate reports submitted to the regulator contained three different figures for the company's 2025 management expenses.

Renewal Commission Exceeded Regulatory Limit

Questions have also been raised regarding renewal commissions paid to agents.

Under regulations issued by the Insurance Development and Regulatory Authority (IDRA), renewal commissions are capped at 10 percent of renewal premiums collected. However, Shanta Life's financial disclosures indicate that the company paid renewal commissions equivalent to 14.52 percent of renewal premiums in 2025.

According to the year-end report, the company collected approximately Tk 2.10 lakh in renewal premiums and paid around Tk 30,000 in agent commissions.

If confirmed, the reported commission ratio would exceed the maximum level permitted under existing regulatory guidelines.

Life Fund Deficit Reaches Tk 14.38 Crore

The life fund is widely regarded as the core financial reserve of a life insurance company because it supports future claim payments and policy benefits.

Shanta Life reported a life fund deficit of Tk 4.98 crore in 2024. By the end of 2025, the deficit had widened to Tk 14.38 crore.

In addition to the deficit, the company reported loans totaling Tk 17.60 crore from other sources.

Industry observers say that the combination of a large life fund shortfall and significant borrowing may raise concerns regarding the company's long-term ability to meet policyholder obligations unless premium growth improves substantially in the coming years.

Current Business Operations

As of December 31, 2025, Shanta Life operated two branch offices in addition to its head office.

The company employed 61 officers and staff members. Its field force consisted of 324 personnel, including 259 Financial Associates (FAs) and 65 Branch Managers (BMs). An additional 38 employees were working in supervisory positions above the BM level.

Company Says Higher Initial Investment Is Normal

Responding to the concerns, Shanta Life Chief Financial Officer and Company Secretary Majedur Rashid Chowdhury said that higher expenses are common during the early stages of a life insurance company's operations because business volume remains limited while investment is required to establish a sustainable organisational structure.

He said much of the company's spending was directed toward recruiting qualified and skilled personnel to build a reliable institution.

According to him, management expects operating expenses to gradually move within regulatory limits over the next two years and believes the company's life fund will reach a positive position by 2027.

However, he acknowledged that returning to profitability within three years may be difficult under current conditions. He also indicated that the company may need to seek additional time from the regulator regarding its future stock market listing plans.

The company did not provide a specific explanation regarding the reported renewal commission ratio of 14.52 percent.

Expert Warns Against Excessive Spending

Dr Biswajit Kumar Mondal, an accounting expert and former chief executive of several life insurance companies, said life insurance is fundamentally a long-term business in which premiums collected today must eventually be returned to policyholders along with investment returns and contractual benefits.

He explained that regulatory expense limits are structured as ratios to premium income, meaning that expenses and commissions should remain proportionate regardless of business size.

According to Dr Biswajit Kumar Mondal, excessive spending during the early years cannot easily be recovered through future premium growth because expense limits continue to apply as business expands.

He added that high operating costs reduce the amount available for investment, increase financial risk and may ultimately weaken an insurer's long-term financial position.