Insurers failure to maintain regulatory capital may have limited scope for business

Kathmandu: The insurers who fail to meet the deadline for the regulatory paid-up capital may be forced to early implement a risk-based capital model (RBC). The officials of the Nepal Insurance Authority shared that the size of the business of insurers who fail to maintain the minimum paid-up capital will be limited to their risk-bearing capacity.

Earlier, the Authority had issued a directive to all the insurers to increase their paid-up capital by almost two times. The minimum paid-up capital was fixed at NPR 2.5 billion and NPR 5 billion for general insurance companies and life insurance companies respectively. Earlier the minimum paid-up capital for the general insurers was NPR 1.25 billion and for life insurers Rs. 2.5 billion. The insurers are provided a deadline of the end of Chaitra 2079. Only 20 days left before the deadline.

So far, 21 insurance companies, including 9 life insurance companies, have signed a memorandum of understanding for the merger. Among them, 4 life insurance companies and 8 general insurance companies already started their integrated businesses. The merger process of Ajod Insurance and United Insurance, IME General and Prudential Insurance has not been concluded yet. In the life insurance business, the merger agreement of Prabhu Life Insurance and Mahalaxmi Life Insurance, Prime Life Insurance, Gurans Life Insurance and Union Life Insurance have yet to be accomplished.

Some of the general insurers and the life insurers are still unable either to opt for a merger or make necessary arrangements for the paid-up capital increment. Asian Life Insurance, Citizen Life Insurance, Reliable Nepal Life Insurance, Sun Nepal Life Insurance, and IME Life Insurance have not been able to make arrangements for additional required paid-up capital. Exemption of deadline has been given to the insurers who are either in the merger process or already accomplished their merger.

The state-owned insurers, Rastriya Beema Sansthan and Rastriya Beema Company, to are far below the minimum level of paid-up capital.

In the general insurance business, National Insurance, Neco Insurance, Nepal Insurance, NLG Insurance, and Rastriya Beema Company are exposed to early implementation of RBC.

According to the officials of the Authority, Companies that opted for a merger will be granted additional time to raise the balance amount of required paid-up capital.

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