Insurers to issue shares to meet capital requirementInsurance companies have been scrambling to obtain approval from the Securities Board of Nepal (Sebon) to issue rights and bonus shares to meet the capital requirement laid down by the Insurance Board (IB).
Insurance companies have been scrambling to obtain approval from the Securities Board of Nepal (Sebon) to issue rights and bonus shares to meet the capital requirement laid down by the Insurance Board (IB).
According to Sebon, six insurers have applied for permission to issue rights shares worth a combined Rs3.42 billion in the first four months of this fiscal year.
Meanwhile, Prudential Insurance, a non-life insurer, has issued 1,283,040 rights shares worth Rs128.30 million to its shareholders while seven have registered bonus shares valued at Rs990.32 million. The IB has directed life and non-life insurance companies to boost their paid-up capital fourfold by mid-July 2018 with the intention of strengthening their shock absorbing capacity.
Life insurance companies have been instructed to maintain a minimum paid-up
capital to Rs2 billion, up from the existing Rs500 million, while non-life insurance companies have been told to boost their minimum paid-up capital to Rs1 billion from Rs250 million.
There are 17 non-life insurers and 19 life insurers operating in the country. Among the life insurance companies, 10 are new ones that have obtained permission recently, according to the insurance sector regulator.
While new insurance companies have been granted licences under the condition that they meet the capital requirement, old ones have been told to raise their paid-up capital by the deadline.
According to the capital increment plans submitted by the insurers to the IB, 10
companies have said that they will meet the capital requirement by making
further public offerings of shares while the rest intend to issue rights and bonus shares.
Among the companies seeking Sebon’s approval, National Life Insurance, Gurans Life Insurance, Prime Life Insurance and Neco Insurance plan to issue rights and bonus shares.
Likewise, Asian Life Insurance and Everest Insurance have aimed to fulfil the capital requirement by issuing rights shares.
Life Insurance Corporation Nepal, Nepal Insurance Company and Rastriya Beema Sansthan Company have registered their bonus shares with the regulator.
Among the companies planning to issue rights shares, National Life Insurance has proposed to make the largest offer worth Rs993.64 million.
It plans to issue six shares for every 10 shares to its shareholders.
It has appointed NIBL Capital as the issue manager. National Life Insurance has also planned to make the largest issue of of bonus shares valued at Rs331.21 million.
IB Director Shreeman Karki said almost all insurers had started the process of raising their paid-up capital. “The board has approved the capital increment plans submitted by all the insurance companies except those of a few foreign based insurers,” Karki said.
The IB has barred foreign insurance companies from repatriating profits from Nepal until they fulfil the capital requirement by the deadline. According to Karki, the board has been reviewing the provisions of Met Life Insurance and Oriental Insurance that maintain branches in Nepal.
“We are discussing what provisions should be made for foreign insurers that
maintain branches here unlike those which operate as joint venture companies,” Karki said.