Kathmandu. Section 81 of the Insurance Act states that an insurer can transfer the business under one type of business to another insurer. In this way, the transferee insurer does not have to close all his business in order to transfer the business. He can only transfer one type of business under the different types of business he is doing.
For example, an insurer selling a pension insurance plan may transfer it to another insurer selling the pension insurance plan because of its high management and operating costs. Because of the size of the business or the expertise of the insurer, the cost of accepting the business may be reduced.
Another example is that an insurer offering term insurance, term insurance, and even specialized health insurance plans may transfer the entire business of its health insurance to an insurer who sells only health insurance. In this transfer, the risk, profit, liability and even the insured directly related to the business will be automatically transferred to another company.
According to Section 113 of the Insurance Act, an insurer who wants to transfer or transfer the type of insurance business (portfolio) has to submit a joint application to the Authority in accordance with Rule 81 of the Insurance Rules:
(a) A special resolution passed by the General Meeting of both the insurers to take the portfolio,
(b) An agreement entered into with respect to the transfer of portfolio,
(c) Decision made by the Board of Directors of the insurer accepting the business in respect of accepting the liability arising after the transfer of the portfolio,
(d) The basis on which the actuary transfers the portfolio shall maintain the capital fund and solvency as determined by the Authority.
(2) If a foreign insurer desires to transfer the portfolio to a domestic insurer, the head office of the insurer shall have obtained approval from its regulatory body.
While handing over the business pursuant to this Rule, the Authority may grant approval by specifying other necessary conditions.
