Kathmandu: The management of Himalayan General Insurance Company Limited(HGI) and Everest Insurance Company (EIC) Limited have signed a memorandum of understanding for merger.
Both companies have agreed to decide the swap ratio based on the DDA. HGI has paid up capital of Rs. 1.17 billion and EIC has Rs. 1.25 billion paid up capital. If the two companies merge in 1: 1, the paid up capital of the consolidated company will increase to Rs 2.42 billion.
As per the recent amendments made in the Directives for Establishment and Operation of Insurance Companies, the minimum paid up capital must be Rs.2.5 billion for non-life insurers. Prior to the amendment, the minimum paid up capital was Rs.1 billion only.
This is the second MoU reached for a merger in the insurance industry. Earlier, MoU was signed between NECO and Premier Insurance for merger though it proved futile.
The Insurance Board(IB), the regulatory authority for Insurance Industry, has introduced the new regulatory capital requirement for the insurers with the objectives of force merger and minimize the number of insurance companies in Nepal. Currently, there are 20 non-life and 19 life insurance companies while there’s 2 re-insurance companies too.
With the doubled paid-up capital requirement for both life and non-life insurance companies, most of the promoters of the insurance companies are under pressure for merger due to limited span of time to meet the capital requirement.