How many Insurers are interested for merger and acquisition ?

Kathmandu: As the Insurance Board(IB) is on the mission to minimize the number of insurance companies with the strategy of merger, only a few numbers of insurers have shown willingness for merger or acquisition.

Out of 39 insurance companies, only six insurance companies, including three life insurance companies have approved the agenda of merger or acquisition from Annual General Meeting(AGM). The officials of the regulatory authority have already requested promoters with cross holdings in different insurance companies with same nature of business to accept the option of merger.

On the life insurance side, IME Life Insurance, Mahalakshmi Life Insurance and Union Life Insurance are interested in merger. The CEO of Mahalaxmi Life, Ramesh Kumar Bhattarai, has already visited some of the life insurance companies’ CEOs and proposed for the merger.

Among non-life insurance companies, Himalayan General Insurance and Premier Insurance have already approved the merger and acquisition agenda from their previous annual general meeting. Everest Insurance, on the other hand, has convened its 27th annual general meeting on April 4, 2022 to approve the agenda of merger.

The IB has taken a strategy to urge or compel the insurers for merger or acquisition to meet the regulatory capital requirement. As per the amendments on Directives on Insurer Registration and Insurance Company Operation made on 24th March 2022, the minimum capital of both life and non-life insurance companies have been almost doubled. Now, the life insurers are obliged to maintain a minimum regulatory capital of Rs.5 billion from Rs.2.5 billion of current minimum regulatory capital. While, non-life insurers have to maintain Rs.2.5billion paid up capital from current minimum paid up capital of Rs.1 billion.

Among 19 life insurance companies, Nepal Life Insurance has already met the minimum regulatory capital requirement. While among non-life insurers, Shikhar Insurance has almost reached to the minimum capital requirement after the disbursement of the latest right share.

Most of the insurers have proposed for stock dividend and issuance of right shares to meet the capital requirement within a year. But, it doesn’t seem that much easy that the regulatory authority, the IB would allow insurers to raise major chunk of regulatory capital through rightshares.

Before the move of the IB for the new regulatory capital requirement, United Insurance, NECO Insurance, NLG, Nepal Insurance and IME General Insurance had also their preparations for mergers and acquisitions with other companies.

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