June 10, 2021 | Investopaper
The Insurance Board has issued directive 2078 regarding brokers in reinsurance. The Board has issued the directive with the objective of developing the market in reinsurance by determining the capital of brokers in reinsurance and arranging registration and rules for the brokers.
According to the directive, the authorized capital of a reinsurance broker should be at least Rs 10 crores. About 50 percent of it should be maintained as paid-up capital. Similarly, 25 percent of the authorized capital should be kept in the term account of the commercial bank.
Likewise, the Board has made a provision that no one should be allowed to work as a reinsurance broker without permission. The reinsurance broker will mediate with the reinsurer on behalf of the insurer and another reinsurer on behalf of the reinsurer regarding the liability arising under the insurance policy issued by the insurer. It will also provide reinsurance expertise services and facilitate claims payment.
The Board has also made provision for brokers in foreign reinsurance. The directive states that the foreing reinsurance brokers may be allowed to open contact office in Nepal on the basis of their international business reputation and other necessary criteria set by the Board.
After receiving the letter of intent from the Board to allow the broker in reinsurance, one has to deposit USD 50,000 as the security deposit in the class ‘A’ commercial bank of Nepal. When reinsurance brokers open an office in Nepal jointly with Reinsurance Brokers of Nepal, they will be able to hold up to 55 percent share of the capital.