Insurers likely to miss new deadline to boost capitalOnly four out of the 38 insurance companies in Nepal have increased their paid-up capital as ordered by the Insurance Board (IB), and the rest look like missing an extended deadline with only two and a half months remaining before it expires.
Only four out of the 38 insurance companies in Nepal have increased their paid-up capital as ordered by the Insurance Board (IB), and the rest look like missing an extended deadline with only two and a half months remaining before it expires.
In March 2017, the IB told life insurance companies to raise their paid-up capital to at least Rs2 billion and non-life insurers to raise it to Rs1 billion by mid-July 2018. Currently, the paid-up capital requirements for life and non-life insurers are Rs500 million and Rs250 million respectively.
Nepal Life Insurance Company among the 18 life insurers, and Himalayan General Insurance, Shikhar Insurance and Neco Insurance among the 20 non-life insurers are the only companies that have fulfilled the requirement.
The IB extended the deadline by six months to allow the stragglers to catch up. The new deadline ends on January 15, 2019.
IB Officiating Executive Director Raju Raman Poudel said 34 insurers had yet to boost their paid-up capital as per the directive. “All these companies have submitted their capital plans, but not one has met the requirement despite the extra time given to them,” Poudel said.
These insurance companies have been defying the IB’s instruction due to the absence of a stern policy, IB officials said. The IB has repeatedly said that it will force merge insurers who do not boost their capital by the extended deadline. “The board is likely to issue yet another deadline instead of taking action against the defiant firms,” the officials added.
The IB issued a directive on merger and acquisition some five years ago, but the insurance sector has seen no amalgamation till date. Last year, the board granted licences to establish nine life insurance and three non-life insurance companies in a bid to increase market penetration.
Insurance services have reached 14 percent of the total population, according to the IB. Nepal has a high lapse ratio of 28 percent, which means that 28 percent of those who purchase insurance discontinue before the policy matures.