Nepal Reinsurance Company is to make a Rs1.6 billion initial public offering after the government agreed to inject additional capital.

The country’s only reinsurance company plans to raise its paid-up capital to Rs10 billion from the existing Rs8.40 billion. The government has agreed to raise its stake in Nepal Reinsurance Company to 44.03 percent from the current 43.55 percent, company officials said.

Chirayu Bhandari, chief executive officer, said the company would issue 16 percent of its shares to the general public in the next fiscal year. “The annual general meeting held on June 17 has approved the new share amount of the government, following which we have sent the related documents to the Office of the Company Registrar for approval,” said Bhandari, adding that they would soon apply at the Securities Board of Nepal to float the public shares.

The reinsurer had targeted offering shares to the general public last year, but it had to postpone its plan due to delays by the government ion increasing its share.

The reinsurer began operations in November 2014. The government has been helping the company in a bid to check the outflow of money in insurance premiums to foreign reinsurance companies.

The government through the budget statement for 2018-19 has made it mandatory for Nepali insurers to reinsure at least 20 percent of their policies with domestic reinsurance companies. Currently, the government is in the process of revising the existing reinsurance policy to attract foreign insurers. “Foreign agencies will be encouraged to undertake reinsurance in Nepal following modifications in the reinsurance policy for making the reinsurance business more effective and systematic,” said the government's financial plan for 2019-20.

Apart from the government, domestic insurance companies hold major shares in Nepal Reinsurance Company. Private sector business entities including the Vishal Group and the IME Group jointly own around 9 percent of the company.

Nepal Reinsurance Company has expanded its operations across 30 countries including member states of the South Asian Association for Regional Cooperation. The company has clients in the United Arab Emirates, Bahrain, Papua New Guinea and a number of African countries including Kenya. Bhandari said they planned to diversify the business after raising the working capital.

In 2003, the government set up the Insurance Pool with the aim of preventing money from going out of the country in reinsurance premiums, which was later converted into Nepal Reinsurance Company.

Before the establishment of the company, domestic insurers used to rely fully on foreign companies to reinsure their risks. The company claimed that it had been able to significantly reduce the amount of money going out of the country for the purpose of reinsurance by expanding its reinsurance portfolio with domestic insurers.

As of the third quarter of the fiscal year, the company had earned a net profit of Rs891 million, out of which 90 percent was from the non-life insurance business. During the period mid-July to mid-April, it collected premiums worth Rs3.54 billion, almost double what it collected during the same period in the previous year.