Insurance Authority Seems Rigid to Its Deadline for Capital Plan Execution

Kathmandu: Nepal Insurance Authority seems rigid to its deadline for the regulatory capital target amid several requests made by the insurers. The majority of insurance companies find it tough to meet the deadline for regulatory capital target achievement.

The life insurance companies and general insurance companies must maintain a minimum of Rs. 5 billion and Rs. 2.5 billion paid-up capital respectively by the end of Chaitra 2079. On 10 Chaitra 2078, the Authority issued a circular to all the insurers to raise their capital assigning the deadline.

The regulatory authority has not allowed most of the insurers to opt for the right shares to raise inadequate equity for the paid-up capital. Following the instruction and a very short span of time, many of the insurers opted for mergers to accumulate equity capital. The Authority aims to downsize the number of insurers compelling them to opt for mergers. To date, a total of six general insurance companies have merged into three and two life insurance companies into one company.

The Authority already issued risk basked capital(RBC) directives for the insurers which are supposed to be fully executed from the financial year 2083/84.

Rajuraman Paudel, executive director of the Authority, said that companies’ failure to raise paid-up capital will not be given additional time. He said, “We have not yet decided on the capital plan, but in my personal opinion, there should not be any extension in the deadline.” He further stressed that insurers with lower paid-up capital may be provided options for limited business as per the risk-based capital regime.

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