Reinsurance Companies Required to Meet Minimum Capital of Rs. 20 Billion: Nepal Insurance Authority
February 1, 2024 | Investopaper
Nepal Insurance Authority has directed reinsurance companies to raise their minimum paid-up capital to NPR 20 billion within a year, with a deadline of Magh 30, 2081 BS. This decision comes as the insurance sector expands, necessitating increased risk-bearing capacity. Reinsurance companies must submit capital plans within 15 days, and the authority is yet to decide on allowing rights shares for the capital increase.
Nepal currently has two operating reinsurance companies, Nepal Reinsurance and Himalayan Reinsurance. While Nepal Reinsurance Company is owned by the government, insurance companies and general public, Himalayan Reinsurance has private sector investments. These two reinsurance companies, Nepal Reinsurance and Himalayan Reinsurance, are required to meet the NPR 20 billion minimum by Magh, 2081 BS. Nepal Reinsurance Company needs to increase its capital by approximately NPR 8 billion, while Himalayan Reinsurance, with private sector investment, must raise its capital by NPR 10 billion.
Additionally, the authority has mandated the distribution of mandatory reinsurance, implemented since Jestha 2079 BS. Initially, insurance companies were required to reinsure at least 20 percent of the direct share exclusively with Nepal Reinsurance Company. This practice has been amended, and now companies must distribute 20 percent of the direct share to Nepal Reinsurance Company and Himalayan Reinsurance Company at the rate of 10/10 percent until 080/81.The phased reduction plan by the Insurance Authority indicates that, starting from 081/82, this distribution share will decrease by two-two percent annually until it is abolished by 085/86..
Earlier in Chaitra 2078 BS, the regulatory authority also increased the capital requirements for insurance companies. The directive stipulated that the minimum paid-up capital for life insurance companies and non-life insurance companies should reach 5 billion rupees and 2.50 billion rupees, respectively, by Chaitra 2079 BS. While many companies have met these capital requirements, some are yet to fulfill them.
