Kathmandu: Almost half of the life insurance companies have chosen not to go for merger to arrange additional paid up capital to meet the regulatory requirements.
Out of the 19 life insurance companies, four companies have yet to issue IPO. Citizen Life, Sun Nepal Life, IME Life and Reliable Nepal Life Insurance are the four companies which have opted to meet the capital requirements through promoters and IPO.
IME Life Insurance has planned to ask it’s promoters to pour is additional 100% for rights shares. The agenda will be endorsed by the fifth annual general meeting.Further additional capital will be gained by issue of IPO and remaining insufficient amount by stock bonus.
Similarly, Reliable Nepal Life and Citizen Life have raised capital with the promoters. Sun Nepal Life has also planned to raise additional 100% capital with the promoters.
As per the regulatory requirement, a life insurance company must have Rs. 5 billion minimum paid up capital by the end of Chaitra 2079. Most of the insurance companies have less than half of the proposed paid up capital which has resulted for mergers among insurance companies.
Nepal Life Insurance already has paid up capital above Rs. 8 billion, so it is not in the rush for capital increment.
National Life will raise the additional capital by stock dividend.Asian Life has prepared to issue bonus shares as much as possible and raise some additional capital by issuing right shares. LIC Nepal has also appied to the regulatory authority for the issue of rightshares.
The Insurance Board will force the state-owned life insurer, Rastirya Beema Sansthan after the enactment of the new Insurance Bill . In the case of Met Life, the capital increment has not been made compulsory since its functioning as the branch office of MetLife America(ALICO).
Apart from this, Prabhu Life and Mahalakshmi Life, Sanima Life and Reliance Life, Surya Life and Jyoti Life, Union Life, Prime Life and Gurans Life have agreed to the merger. They are advancing the process of merger.
The Insurance Board arranged for tax exemptions for the insurance companies that agree to the merger by the end of Asar last fiscal year. Although the capital has been increased with the aim of reducing the number, 10 of them have dared to raise capital by themselves, remaining 9 companies will be reduced to 4 after merger. If the ongoing merger process succeed, there will be a total of 14 life insurance companies.