Kathmandu. The hydropower projects damaged by floods and landslides are facing a huge financial crisis as they have not received timely claim payments from insurance companies.
According to the study report related to hydropower projects published by the Nepal Insurance Authority, it takes 6 months to a year or more to settle the insurance claim after the damage to the hydropower project. When the project is closed during this period, the promoters will not be able to pay the interest of the bank.
There is an acute shortage of skilled and expert insurance surveyors in Nepal who can accurately assess the damage related to hydropower machinery and civil engineering. As a result, the claim process has always been complicated.
Floods in hydropower projects do not only damage physical infrastructures. The biggest loss is the income crisis caused by the shutdown of power generation. The NEA is not allowed to sell electricity for months when the transmission line collapses due to landslides or problems arise in the tunnel. Even if the physical maintenance cost is low, the projects are on the verge of bankruptcy due to the stoppage of daily income.
The study also highlighted the continuing challenges in claims management. While some insurance companies have been able to effectively control the claim ratio and manage the unpaid claims, others are struggling due to delays in claim settlement, high value claims and fluctuating settlement trends.
Fiscal Year 2077. Claims of Rs 63.31 crore pending in FY 2081. It has increased to Rs 216.26 crore. This shows that the number of claims is increasing and points to the need to make the claims process more efficient and effective.
The claim settlement ratio has decreased from 197.14 percent to 47.13 percent in the same period. This indicates that there is a delay in resolving complex or high-value claims, the report said. According to the report, reinsurance reimbursements fluctuate depending on the severity and nature of the claim.
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Many hydropower developers in Nepal either don’t understand the value of such “trade barriers” insurance or ignore it to protect premiums. As a result, they are completely vulnerable in times of crisis.
Nepal’s insurance sector is facing a severe shortage of manpower to assess the damage to a complex technical sector like hydropower. Most of the surveyors currently available in Nepal come from the background of general insurance (car, house, etc.).
In the absence of expert surveyors who understand hydromechanical, geology and high voltage electrical engineering, there can be no real assessment of the damage. Due to the lack of expert manpower, there has always been misunderstanding and litigation between the insurance company and the promoters. To solve this problem, there is a need for special training centers in Nepal.
