Kathmandu: The term deposits of banks and financial institutions cover above 77 percent of the total investments made by 18 life insurance companies. Life insurance companies have made a total of Rs. 3 trillion 84 billion 23 crores in the term deposits of BFIs within the first quarter of the current fiscal year 2079-80.
According to the data unveiled by the Nepal Insurance Authority, life insurance companies have investments of Rs. 3.35 trillion in term deposits of ‘A’ class licensed commercial banks. It covers 67.28 percent of the total investment made by the life insurers in Q1 of FY 2079-80. Similarly, a total of Rs. 43.12 billion in term deposits at ‘B’ class licensed development banks. A total of Rs. 5.47 billion has been kept in the term deposit with the financial institutions. The majority of the term deposits of life insurers are concentrated in commercial banks.
With the hope of a high return from the secondary market, life insurers have made a total investment of Rs. 67 billion 52 crores 22 lakhs in the stock market. Unfortunately, the bearish market has forced most of insurers to make provisions against the loss from the secondary market.
Similarly, 81 percent of general insurance companies’ investment is concentrated in the term deposits of BFIs. According to the Authority, 17 general insurers have a total of Rs. 37.34 billion in investment in commercial bank’s term deposits, Rs. 5.64 billion in development bank’s term deposits, and Rs. 9433 million in financial institution’s term deposits.
At present the profit earning of the life insurers is largely dependent on the interest income offered by the BFIs. Life insurers earn high interest against their insurance funds during high market interest rates. The BFIs have been offering double-digit interest rates against term deposits for the insurers. The interest rate may fall into single digit from next month onwards.
The limit of investment in a term deposit, security bonds, debentures, tourism, hydropower, and renewable energy production is guided by the Investment Guidelines issued by the Nepal Insurance Authority.