Kathmandu: The Nepal Insurance Authority(NIA) has issued circular to Nepal Reinsurance Company Limited(Nepal Re) to release additional fund for the settlement of long pending Covid19 Insurance claim. NIA has threaten to take action under section 123 and 124 of the Insurance Act 2079 against Nepal Re if it fails to comply with the instruction.
Nepal Government has provided Rs. 1 billion against its liability of over Rs. 7 billion. NIA had decided to consider Govt’s fund as 55 percent and arrange additional 45 percent from the contribution of Nepal Re, general insurers and NIA itself. NIA has asked Nepal Re to contribute 12 percent of the 45 percent amount to be arranged. NIA has announced that it will contribute 8 percent while the general insurers have been asked to provide 25 percent with the 45 percent.
The meeting of the Board of Directors(BODs) held on 27th Kartik has decided to disobey NIA’s instruction for the contribution in the Covid19 Insurance claim. The BODs has admitted that Nepal Re has no more liabilities towards the pending claim against Covid19 Insurance. It has said that NIA’s instruction would unnecessarily add financial burden to Nepal Re. Following the decision of BODs of Nepal Re, NIA has issued a circular on 29 Kartik 2079 with a threaten to take legal action against Nepal Re incase of failure to meet the compliance.
In sub-section (5) of section 123 it has been mentioned that, ‘Despite what is written elsewhere in this Act, in the event of a major calamity or other crisis in any part of the country or region, the authority may prepare and implement a separate procedure related to insurance claims for a certain period in the place of such crisis.’ Section 124 provides for payment of reinsurance claims. It has said that ‘the reinsuring insurer shall pay the amount for the reinsurance claim based on the reinsurance contract between the insurer doing the insurance business and the insurer doing the reinsurance business.’
Shankar Kumar Rayamajhi, the CEO of Nepal Re said that, it is their responsibility to serve the interest of all the promoters including public shareholders. He said, “According to the Covid19 Insurance Standard 2077, since Nepal Re has already fulfilled its financial obligations, it is illegal to assume obligations beyond this.” That’s why we are not ready to pay any additional claim. Nepal Govt has 44.03 percent stake in Nepal Re while Insurance Companies have 39.06 percent and general public has 16 percent stake in it.
According to the Covid19a insurance standard, the liability beyond the claim of Rs.3.5 billion lies to the account of Government of Nepal. But the Govt has been hesitating to fulfill its financial obligation.