Kathmandu. KATHMANDU: Nepal Insurance Authority (NEA) has revised its Insurance Directive-2080 BS. Insurers had hoped that the amendment would prevent over-centralisation of reinsurance risk. Contrary to the expectations and assumptions of the insurer, the authority did not change any provision related to reinsurance in the reinsurance guideline.
The revised version of the Directive has been brought with a completely general revision. In the amended version, the period for compulsorily registering the office of foreign reinsurance broker companies in Nepal has been extended for the fourth time.
Nepal Insurance Association and Life Insurance Association have suggested to the authority in writing that some provisions in the directive are not in the interest of the entire insurance sector, saying that over-centralization of insurance risk within the country could lead to catastrophic situation in the future. As per the directive, the insurer must transfer up to 60 percent of the risk to two domestic reinsurers.
Prior to this, the risk was transferred through reinsurance agreements with global insurers. After the issuance of the directive, the domestic reinsurer has to be handed over to Nepal Reinsurance Company and Himalayan Reinsurance, which are financially weak, weak in risk management and have weak experience compared to foreign reinsurers.
The non-life insurer was able to easily pay the claim even for the damage caused by the powerful earthquake of April 11, 2015 due to the reinsurance from a foreign and financially strong reinsurer.
Insurers, who are responsible for protecting the interests of the insured even though they are forced to comply with regulatory guidelines, are worried about the provisions related to reinsurance. “We are just the trustees of the insured, the money in the insurance fund does not belong to us, it belongs to the insured,” a CEO told Insurance Khabar. ’
When asked why the suggestions given by the insurers for amending the reinsurance directive were not incorporated, Executive Director of the NRA Sushil Dev Subedi said, “The amendment has been brought only to remove the obstacles seen in the foreign currency exchange facility of foreign reinsurance brokers.” This is not an amendment for other issues. ’
Subedi said that homework is underway to amend the reinsurance directive on the basis of the suggestions given by the insurer and the study of the NRA. He said, “Discussions and consultations are underway in the Board of Directors with priority on the draft of the directive amendment.” Insurers are not in a hurry right now. It takes some time. ’
