Regulatory capital: General insurers hopeful to get nod to issue right shares

Kathmandu: General insurance companies have expected a green signal from the regulatory authority to raid additional equity capital through right shares. The Nepal Insurance Authority seems reluctant to allow insurers to raise equity capital through the right shares.

The officials from the Authority have already clarified that the right shares would be the last resort only for those insurers who could not raise minimum paid-up capital through merger or stock dividends. At least United Ajod Insurance is expected to get the nod from the insurance regulatory body to raise equity capital through the issue of right shares.

The minimum-up capital for the general insurer is NPR 2.5 billion against existing NPR 1.25 billion paid-up capital. Shikhar Insurance, Sagarmatha Lumbini Insurance, Siddhartha Premier Insurance, and IME Prudential Insurance are the four insurers with paid-up capital above NPR 2.5 billion. Apart from Shikhar Insurance, three companies achieved the minimum paid-up capital through a merger.

The state-owned general insurer, Rastriya Beema Company has the lowest paid-up capital among general insurers. It has paid up capital of NPR 266.639 million. The company has not been able to distribute the bonus due to the inability to conduct its financial audit and annual general meeting. The insurer has planned to raise the equity capital through bonus shares completing the audit report ASAP.

Similarly, Nepal Insurance Company and Prabhu Insurance Company have expected approval to raise capital through rights shares. Prabhu Insurance is also looking for alternatives to attract FDI. At present, Prabhu’s paid-up capital is NPR 1.37 billion. Another 1.12 billion is needed to reach 2.5 billion. As a secondary option, Nepal Insurance may raise additional capital using the proceeds from the sale of land. Its existing paid-up capital is NPR 1.48 billion only.

NLG Insurance Company, a subsidiary of National Life, has 71.32 percent capital inadequacy. Currently, the company’s paid-up capital is NPR 1.45 billion. Likewise, Neco Insurance has planned to issue a small number of right shares if the bonus shares are not enough. Currently, the capital of the company is 2.01 billion. The company needs an additional 23.23 percent of its current paid-up capital to meet the target of NPR 2.5 billion.

United Ajod, formed by the merger of former United and Ajod Insurance, also needs NPR 595 million for minimum paid-up capital.

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