Kathmandu: The Insurance Board(IB) has drafted the Directives for Foreign Employment Insurance Pool(FEIP) after a dispute over the disbursement of proceeds of FEIP.
The IB has given legal base after the dispute created by Sun Nepal Life Insurance defying the gentlemen agreement among life-insurers.
The pool was established with the consent of the IB and the life insurance companies after there was extreme illegal practices and distortion found in the Foreign Employment Insurance(FEI). The main objectives of the FEIP is to share the risk among life insurance companies and control the irregularities in FEI issuing the policy through the Pool. Though the FEIP was formed on an understanding, there was not legal ground for it.
Sun Nepal has denied to deposit more than Rs. 300 million in FEIP which was collected through FEI. It has claimed that since most of the premium has been earned by itself.
Extensive changes have been made to the existing practices in the draft by reversing the agreement reached by the Life Insurance Association of Nepal on the division of liabilities and profitability. The Life Insurance Association had agreed to have equal share in the income and liabilities among all the companies from FY 2079/2080 BS. It was agreed to have 5.882 percent share for each company.
Rajuraman Poudel, executive director of the IB, informed that the distribution modality has been changed to resolve the current dispute and the long-term solution will be found through the directives in future. He informed that the insurance companies have been instructed to implement the current distribution modality immediately.
As per the instructions given by the IB, it is mentioned that the pool operator will get 15 percent share directly. Similarly, 20 percent of the total risk and liability will be born by Nepal Re-insurance. In addition, the provision that operators get 5 percent royalty for operating expenses has also been continued.
Thus, after allocating 40 percent as operating expenses and re-insurance support to Nepal Re-insurance, Pool operator company, management expenses, etc., the remaining 60 percent will be shared equally with other companies. Two foreign insurance companies Met Life and LIC Nepal have not agreed to join the Pool. On this basis, the remaining 13 companies will each acquire 4.61 percent of the business.
