Kathmandu. On an average, the solvency ratio of life insurance companies is around 2 percent. Nepal Insurance Authority (NIA) has released the current fiscal year 2082. According to the data of the second quarter (July-December), the average solvency ratio of 13 life insurers is 1.82 percent. NEA has set the solvency ratio of life insurer at 1.3. However, the solvency ratio of all 13 life insurers is above 1.3.
The solvency ratio of the life insurer at 1.3 means that the insurer should have at least Rs 1.30 worth of financial assets to pay off the liability of Rs 1. For a life insurer, solvency refers to its ability to repay its long-term obligations, especially those of the insured, from one’s own assets. It is an important financial yardstick used to assess a company’s financial health and the soundness of its balance sheet. A high ratio indicates a strong financial position and a strong ability to withstand unexpected losses and meet future obligations.
According to the statistics, Reliable Nepal Life Insurance has the highest solvency ratio of 2.55 among life insurers. This is almost double the solvency ratio of 1.3 for life insurers.
Sun Nepal Life Insurance has solvency ratio of 2.44, IME Life Insurance 2.4 and MetLife 2.08.
Himalayan Life Insurance has the lowest solvency ratio of 1.32. This is close to the minimum limit set by the authority.
