Kathmandu: The Insurance Board has splitted the 20 percent direct cession given to Nepal Reinsurance(Nepal Re) among two indigenous reinsurers, Nepal Re and Himalayan Re-insurance (Himalayan Re).
The decision has been made in favour of private sector’s Himalayan Re-insurance against state-owned Nepal Re.As per the provision made on annual budget of Fiscal Year 2075/76, Nepal Re has been getting 20 percent business directly from Nepalese insurance companies. Now, with the new circular, Nepal Re will get only 10 percent from reservation.
Rajuraman Poudel, executive director of the Board, said that the reservation received by insurance companies will be decreasing at the rate of 2 percent each year from next year.
He said the decision has been taken to curb remittance outflows and keep the market competitive. He said that the current 10 percent direct cession of insurance companies will be reduced by 2 percent every year and after 5 years there will be no such provision of direct cession.
In direct session, all insurance companies have to reinsure 20 percent of their risk with indegenious re-insurers.
Earlier on 11 May, the Board has issued a separate circular to all the insurers to provide business under treaty reinsuance. It has instructed the insurers to allocate 15-15 percent of the remaining 80 percent share to the business in the first year and 20-20 percent of the business in the second year to each reinsurer (Nepal Re and Himalayan Re) after the 20 percent share under the treaty reinsurance. From FY 2080-81, 76 percent of the total business under the Treaty Reinsurance will now have to be provided to indigenous reinsurers. According to the insurers, if 76 per cent business is concentrated to the domestic reinsurers, the foreign reinsurers will not be willing to bear the risk of the remaining small portion.
However, insurers have been instructed to provide 100 percent of the facultative business to indegenious re-insurers only until they decline to accept it.In case the indigenous reinsurer decline to accept the facultative reinsuance in full or in part, it may be provided to any foreign reinsurer with at least AM Best Rating Agency’s B Plus Rating or similar (A in case of S&P Rating, A2 in case of Moody’s Rating and A in case of Fitch Rating).