The insurance regulator has barred Pioneer Insurance from teaming up with the Life Insurance Corporation (LIC) of India to launch a joint venture in life insurance business in Bangladesh.

The issue has angered the local general insurer so much that the company threatened to go to court.

“This is an injustice to us,” said QAFM Serajul Islam, managing director of Pioneer Insurance.

The regulator has a different view. Shefaque Ahmed, chairman of the Insurance Development and Regulatory Authority (IDRA), said a general insurer cannot get involved in the life insurance business.

But Islam said there is a precedent for forming such a joint venture and cited an example that a general insurer—Rupali Insurance—has become a sponsor of a newly-established life insurance company—Sonali Life—in Bangladesh.

Although Pioneer has been working as a local partner of LIC for nearly three years, the IDRA is not allowing Pioneer to be involved in life insurance business.

IDRA handed a consent letter to the LIC on Saturday, in the presence of the prime ministers of Bangladesh and India, allowing the insurer to operate in Bangladesh. That was one of the 22 deals and memorandums of understanding signed by the two nations during Indian Prime Minister Narendra Modi's visit to Dhaka.

Partnering with Pioneer Insurance, the LIC first applied to the IDRA in May 2013 for registration.

Of the Tk 100 crore in paid-up capital of the proposed company, LIC's share was 54 percent and Pioneer's 6 percent, according to the proposal. The rest 40 percent would come from initial public offering.

The share of LIC stands at 50 percent at present and local entrepreneurs will buy 10 percent, according to the consent letter given to LIC, a top IDRA official said.

IPO stakes remain unchanged at 40 percent.

On the 10 percent of local shares, he said it is yet to be decided after dropping the name of Pioneer.

The IDRA chairman believes the entry of a foreign company like LIC would make the industry more competitive.

“LIC's entry will have a positive impact on the market,” Ahmed said.