Kathmandu. Fitch Ratings, the world’s leading rating agency, has downgraded its outlook for the global reinsurance sector for 2026 from neutral. Reinsurance premiums are projected to decline in 2026 on the back of increased competition among reinsurance companies and adequate capital infusions.
According to a recent report by Fitch Ratings, claims payment terms are expected to ease and prices decline, especially in the property insurance sector.
Currently, Nepal Reinsurance Company and Himalayan Reinsurance Company are in operation in Nepal. As reinsurance rates fall in the global market, the cost of retrocession by these companies abroad (the process of transferring the risk other than self-insuring) to other insurers may be cheaper. Although this will provide some relief to the profits of Nepali companies, it will add challenges to the domestic market.
Nepal Insurance Authority (NEA) has directed both the reinsurance companies to increase their paid-up capital to Rs 20 billion by mid-January 2082. Presently, its paid-up capital is around Rs 13.42 billion. Although the company has decided to issue 100 percent right shares to raise its capital, the investment to be made by the government has not been finalized yet.
Himalayan Reinsurance Company (HIC) is planning to merge with Nepal Reinsurance Company Ltd. Earlier, it had announced that it would meet its capital target of Rs 20 billion through bonus and right issue without prior approval from the regulator.
According to the latest financial details of Nepal Reinsurance Company, although the business has increased, there has been some contraction in the profit. Nepalese reinsurers have invested 81 percent of their investment in the bank’s fixed deposits. This has strengthened the company through interest income. However, banks are not accepting deposits even at the interest rate of deposits which have fallen to single digits in recent times.
Fitch said social inflation (rising litigation cases and the cost of reparations) increased the risk in countries such as the US. In Nepal, natural disasters such as floods, landslides and earthquakes are the main risks. It is a positive sign for Nepal that the global catastrophe risk is cheaper.
