Kathmandu: The Insurance Board has issued a fresh circular to all life and non-life insurance companies for 100 percent re-insurance support from domestic re-insurance companies. The IB has restricted all the life and non-life insurance companies to seek re-insurance support from any established, reliable and strong global re-insurers.
The IB’s circular has been issued to pave way for the Himalayan Re-insurance Company which has yet to get recognition from the market.
The IB aims to provide business to the private sector’s player Himalayan Re without any delay.
Had Himalayan Re submitted the condition to the Insurance Board that the business will be gained only if the Board favors it? Or the Chairman of the IB had made any of such commitment to the promoters of the Himalayan Re ?
CEOs insurance companies have criticized the circular of the regulatory authority and claimed that the decision of the IB has been made without pondering over its wide impact. CEOs fear the incase of catastrophe, not a single penny could be paid to the insurer.
‘It’s going to be another blunder of the regulatory authority,’ a veteran CEO commented on anonymity, ‘We have not been yet able to overcome the financial burden of Covid19 insurance.”
The IB has issued instructions to all life and non-life insurance companies today to continue the 20 percent Direct Cession with Nepal Re-insurance and share the remaining 80 percent re-insurance business among the two homegrown re-insurers, Nepal Re and Himalayan Re.
As per the directive of the IB, the first 20 percent of the business has to be given to Nepal Re as directed by the Federal Government and out of the remaining 80 percent business, it has to be shared among the two re-insurers Nepal Re and Himalayan Re.
The fresh direction mentions that, in case of rejection of any re-insurance support by the homegrown re-insurers, the re-insurance of such rejected business can be done from a global re-insurer having qualified as mentioned in the Re-insurance Guideline 2078.
Insurance Business is full of risk. So, it needs a strong financial support so that it can compensate at the case of any unexpected events. So, globally it has been widely accepted practice that the an insurer should seek for better and stronger re-insurer for re-insurance support. Even the Re-insurance Directives of Insurance Board mentions that the leading re-insurer must have a credit rating of “A-” with strong outlook.