To make the supervision of insurance companies more realistic and to move towards the risk based supervisory system, Beema Samiti (Insurance Board) has recently introduced 20 major ratios with reference to the Insurance Core Principles (ICPs) of the International Association of Insurance Supervisory (IAIS).
These major ratios have been taken with due consideration from the best practices that are followed internationally after a detailed diagnostic study of Nepalese insurance companies by Pricewaterhouse (PWC), says Beema Samiti. The ratios are adopted as part of a Financial Sector Support Project (FSSP) for internal benchmarking for a prudent supervision system in collaboration with Beema Samiti and with DFID support.
These new ratios will help to identify key trends in insurance companies that will support their off-site supervision. Based on the findings of an off-site supervision report, Beema Samiti will carry out an on-site supervision.
These ratios have been developed on the CARAMEL framework (Capital, Assets, Reinsurance, Actuarial Reserves, Management, Earnings and Liquidity). Further, this framework has been categorised into Business Outlook, Capital Adequacy and Solvency, Asset Quality and Credit Control, Reinsurance and Actuarial, Expenses Analysis and Investment and Profitability.
Insurance companies are required to submit reports in the prescribed format from mid-January 2018 on a quarterly basis and from the end of the current financial year on an annual basis. These ratios are additional to the existing financial reporting requirements for life and non-life companies. This will increase the scope of supervision for Beema Samiti and also enable the companies to have a more holistic view of their financial soundness.
Further, to make the off-site supervision more effective and efficient, Beema Samit is closely working with the World Bank in developing the off-site manual template. Further, Beema Samiti is planning to develop software in April 2018 with the help of the World Bank for an efficient and effective online reporting system.