The Insurance Board, the insurance regulatory authority of Nepal, has issued new directives for the licensing and operation of insurance companies in the Nepalese insurance market, including raising the minimum capital requirement.
According to the directives, the minimum capital requirement for a non-life insurance company is NPR1 billion (US$9.7 million) and for a life insurance company, NPR2 billion. Currently, a life insurance company has a minimum paid-up capital requirement of NPR500 million and a non-life insurance company, NPR250 million.
Existing insurance companies have to meet the new capital requirements by 15 July 2018, otherwise they might be instructed to merge with another insurer.
In addition, foreign insurers interested in establishing a joint venture in the country can have a stake of up to 80% in the venture. Foreign insurers can enter into technical service agreements.
In the meantime, a committee has been set up to study the market and explore whether more insurance companies are needed in the Nepalese market. The regulator has decided to postpone the approval of new licences until the study team submits its final report. The Insurance Board has also decided that applicants already in the pipeline waiting for an insurance licence must meet the new capital requirements.
Nepalese insurance industries are small and underdeveloped with 27 companies operating in the market. Among them, nine are life insurance companies, 17 are nonlife insurers and one is a reinsurer.
Agreement between government of Nepal and World Bank
The government of Nepal and the World Bank have signed an agreement to strengthen and develop the insurance sector in Nepal. In this agreement, three major components and provisions have been included. These are:
- a legislative review especially review and revision of the existing insurance law and directives issued by the Insurance Board;
- assessment of the current off-site supervisory process in order to assist the Insurance Board to enhance it; and
- research into possible market and product development opportunities in the Nepalese insurance market including the implementation of an earthquake catastrophic programme.