June 6, 2020 | Investopaper
Corona insurance has been resumed after the government reached a risk sharing agreement. The Insurance Board on Thursday had directed to suspend Corona Insurance for some time saying that the risk has increased as the liabilities exceed the capital of the insurance companies. The board has directed to resume the sale of insurance policies after the insurance board, insurance company, government and reinsurance company all agreed to share the risk on Friday.
There was widespread criticism that insurance was discontinued at a time when the number of corona infections was rising at a high rate. Insurance experts had alleged that the insurance had to be discontinued due to weaknesses, including instructions to issue insurance policies without adequate preparation. The board reached an agreement on Friday after much protest.
Risk Sharing Agreement
As per the agreement, the insurance companies will pay the first 10,000 claims of Corona Insurance. After that, it has been agreed that Nepal Reinsurance Company will pay additional 10,000 claims and another 5,000 claims will be paid from the catastrophe fund of insurance companies. Every insurance company should keep a certain percentage of its profits in the catastrophe fund. Now the same fund will be used. After the mentioned 25,000, additional 10,000 claims will be paid by the Insurance Board. All liabilities (amounts) for payment of claims above that will be borne by the government. After all parties agreed to share the risk, the insurance companies agreed to sell the Corona policy.
Corona is also a kind of epidemic, so the insurance companies were terrified when they could not find a company for reinsurance. As the number of insured increased with the increase in infection, companies had more liabilities than capital.
The term of the insurance policy on Friday has been modified. Under the revised arrangement, the period of corona insurance will be only till Chaitra 2077. In the previous policy, the term of corona insurance was extended to one year from the date of insurance. Earlier, the risk liability of Corona Insurance was placed under the ‘bridge’ of microinsurance. Under this, Nepal Reinsurance Company would be alloted the 20 percent and the non-life insurance companies would participate. in the remaining 80 percent.
Current Status of Corona Insurance
As of Thursday, 339,774 people have taken out corona insurance. The sale of insurance policies was started from Baisakh 7 for the protection against the risk of Covid-19. The insurance fee of Rs. 186.8 million has been collected during the period. The board has stated that 29,991 insurance policies were sold during the period. The insurance policy is sold by 20 non-life insurance companies.
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