Nepal: Regulator concerned about possible reduced powers
Source: Asia Insurance Review | Oct 2015
Nepal’s Insurance Board (IB) is concerned about provisions in the country’s draft constitution that it fears may affect the way it regulates insurance companies.
A provision in the draft constitution, which is currently before lawmakers, says that the central authority’s power will be limited to that of formulating insurance policies. Another provision of the draft constitution says that provinces will be allowed to manage and operate the insurance sector, reported The Himalayan Times.
If these provisions take effect, the IB will not be allowed to frame laws to regulate the insurance sector, issue or renew insurers’ operating licences and promote insurance business. In other words, insurance companies will be entirely regulated by the provinces.
A plausible reason for the proposed constitutional provisions on regulating the insurance sector could be to increase the rural population’s access to insurance, as most of the insurance companies in Nepal are urban-centric.
IB Chairman Fatta Bahadur KC told The Himalayan Times that it is too early to adopt the proposed system in the country where the insurance sector is at a nascent stage. “It is true that insurance penetration in areas outside the urban centres is low. But delegating regulatory powers to provinces cannot assure rapid growth of the insurance sector. This is because many provinces may lack knowledge, experience, expertise and human resources to regulate insurance business. So the new provisions will only induce disaster in the sector and put policyholders’ interests at stake,” Mr KC said.
“Power could be gradually transferred to provinces once we gain more expertise. And in the meantime, the IB should open branch offices in the provinces to generate awareness about insurance,” he added.