Kathmandu. The Global Insurance Market Report 2025 released by the International Insurance Regulatory Agency (IAIS) has warned of some new structural risks although the global insurance sector is financially strong overall. The impact of this can be seen gradually in the insurance market of Nepal and South Asia.
According to the report, although the capital adequacy, profitability and liquidity of the world’s largest insurance companies are satisfactory, the increasing investment in private debt and alternative assets in the life insurance sector has added new challenges in long-term risk management.
According to the IAIS, such investments can increase returns. But it can also increase risk for markets with weaknesses in valuation transparency, liquidity risk, and supervisory capacity. This is a matter of special concern in the context of Nepal and South Asian countries. As many insurance markets in the region are still in the early stages of development, regulators and companies need to adjust their investment policies and risk management systems to reflect international trends.
The report noted that geoeconomic fragmentation in the global economy is exacerbating currency fluctuations, reinsurance access and uncertainty in international investment. This could have a direct impact on the reinsurance costs and risk transfer capacity of South Asian insurers. In small and open economies such as Nepal, the report indicates that in view of such external risks, advance preparation of capital planning and claim payment capacity is necessary.
Similarly, while the increasing use of artificial intelligence (AI) and digital technologies has helped increase efficiency, cost reduction and customer access in insurance, regulatory vigilance around data security, cyber risk and model transparency is imperative. As digital insurance services are expanding rapidly in South Asia, especially in Nepal, it is necessary to strengthen the risk control system equally along with technology.
Pointing to climate change and natural disaster-related risks as long-term challenges for the global insurance sector, the report states that the risk coverage gap in disaster insurance is still huge. This message is especially important for countries like Nepal, which are at high risk of earthquakes, floods and landslides, where the risk of natural disasters is high but insurance access is limited.
This report by IAIS has given a clear message to the insurance sector of Nepal and South Asia to be more aware of international risks, investment trends, digital transformation and climate risks, and strategic reforms in supervision, capital management and expansion of insurance access.
