Kathmandu: The Nepal Insurance Association and the Life Insurance Association are going to protest institutionally against the controversial circular of the Insurance Board to sign a 100 percent re-insurance treaty with the Nepalese Re-insurers.
There are two re-insurers in Nepal i.e. Nepal Re-insurance Company Limited and Himalayan Re-insurance Company Limited. Nepal RE, a state-owned re-insurer while Himalayan RE is promoted by the private sector. Himalayan RE has come into operation since last July and yet to commence its re-insurance business internationally.
The circular of the IB has been criticized for making a crucial decision to push the entire insurance industry at high risk under the pretext of controlling the trade deficit by withholding large amount of outward re-insurance fees.
The IB on Thursday issued a four-point circular with the aim to fully control 19 life insurers and 20 non-life insurers by the two local re-insurers, Nepal Re-insurance and Himalayan Re-insurance.
The circular issued by the IB stipulates that a re-insurance treaty can be reached with a foreign re-insurer only if the local re-insurers refuse it. This means that the business of the concerned insurer will come to a standstill if the local re-insurers refuse to share any or all of the risks of the insurer and do not admit the same in writing.
Counting only the outward remittance for but completely ignoring the inward re-insurance claim? An official of the Nepal Insurers’ Association(NIA) said that the decision of the IB is suicidal for the nation, adding that the circular that has been issued is as ridiculous and seems like issued by those who do not understand the sensitivity of the insurance sector.
Chunki Chhetri, general secretary of the NIA, an umbrella organization of non-life insurers, said that NIA has taken the circular seriously. He said that ‘It is a very serious and far-reaching issue and the our union will decide on it institutionally.
The NIA has called a meeting of the officials on Sunday afternoon regarding the controversial circular of the IB.
Even after eight years of operation, Nepal Re has not been able to get rating from the international rating agency. The newly established re-insurer Himalayan Re’s with Rs. 7 billion paid-up capital has not so enough performance to be evaluated for re-insurance reliability.
Have we examined the financial strength or risk bearing capacity of the Nepalese Re-insurers? An executive member of the Life Insurers’ Association of Nepal(LIAN) commented, “Who will take the responsibility if there a huge loss tomorrow due to such foolish decision?”
How much credibility has Nepal Reinsurance gained in the international insurance sector yet? One of the chief executive officers of a life insurance company said, “We are lobbying for an open economy, and restricting the insurance industry’s access to the competitive market?”
Global re-insurers will be surprised to know that the regulatory body in Nepal has decided to ignore the re-insurance risk and a far-reaching impact, another insurer commented.
As insurance services are a purely technical subject, the insurers here are not only receiving re-insurance support but also technical expertise from reputed global re-insurers like Hanover Re, Scor Se, Trust Re or General Insurance Company(GIC) and others. They are also getting opportunities to learn new things and understand international practice. Domestic re-insurers have very weak technical expertise.
Raju Raman Poudel, spokesperson and executive director of the IB defended the circular. He said, “We have issued the circular with the main objective of controlling the trade deficit of the country.” We feel that re-insurance should be done in Nepal as far as the company’s capacity. He also claimed that before making such a decision, the practices of neighboring countries India and Bangladesh were too studied.