Kathmandu: The apex body of general insurers, the Nepal Insurers’ Association (NIA) has given seven days ultimatum to domestic reinsurers to restore the reinsurance contract. The meeting of the NIA held on Thursday decided not to provide business under mandatory direct cession to the domestic reinsurers if the revised commission rate is not withdrawn.
Nepal Reinsurance Company (Nepal Re) and Himalayan Reinsurance (Himalayan Re) have offered a new reinsurance contract slashing reinsurance commission by up to 14 percent point. The reinsurers have offered a new contract agreement for the current financial year 2080-81.
NIA has given an ultimatum to the reinsurers either to renew the reinsurance contract for direct cession as per the expired contract or to lose the business under the direct cession. The proposed commission rate offered by both of the reinsurers has slashed the reinsurance commission by 2 to 14 percent points.
Issuing a press note, the NIA has stated that, since there are no changes in the level of risk under the risk shared through direct cession, it’s quite illogical to deduct the commission rate unanimously. NIA has also warned that failure to respond to their request within 7 days will be deemed as a rejection of the direct cession. If the reinsurers are not ready to continue the commission rate of last FY 2079-80, the general insurers will make arrangements for risk shared under direct cession.
The reinsurance directives for the insurers have made it mandatory for general insurers to share a minimum of 10 percent of their reinsurance business with each of the domestic reinsurers.