Unaudited financial results of 14 listed private non-life insurers show that companies generated a net profit of Rs 495.46 million in the nine-month period till April 12, as against Rs 363.2 million in the same period last fiscal year.[break]
The profits were mainly a result of a surge in the sales of insurance products, mainly motor insurance and third-party insurance which cover damages to vehicles in road accidents.
Data show nine out of 14 companies reporting higher sales during the period, with NLG Insurance, Siddhartha Insurance and Lumbini Insurance leading the way. NLG, for instance, sold 113,355 new insurance policies during the period, while Siddhartha and Lumbini issued 45,139 and 35,502 new policies, respectively.
The sales hike, reported by insurers, had direct impact on their earnings, with non-life insurance companies reporting gross premium income of Rs 4.73 billion in the first nine-month period, as against Rs 4.18 billion in the same period last fiscal year.
Statistics, however, show most of this income going into the pockets of reinsurance companies, since companies were able to retain only Rs 2.25 billion in net insurance income during the period, which is 52 percent of the total premium amount collected by non-life insurers.
It is a known fact that domestic non-life insurance companies rely too much on reinsurance companies based in countries like India, Malaysia and South Africa, among others.
Reinsurance companies insure products sold by domestic insurance companies, which means that Nepali insurance companies only collect money from clients here and insure goods and assets of their customers with companies based abroad. They do this because they work with very little capital and cannot absorb shocks in case of crisis.
But this practice of resorting to backstop insurance costs a lot of money. Shikhar Insurance, for instance, spent 70.6 percent of the gross premium income of Rs 621.55 million to purchase insurance policies from reinsurance companies. Everest Insurance, on the other hand, coughed up 66.54 percent of total premium amount collected in the nine-month period to pay the bills of reinsurers, while Premier Insurance had to fork out 60.38 percent of gross premium amount to purchase policies from reinsurance companies.
Because of this reason, Binod Aryal, executive director of the Insurance Board, the insurance sector regulator, had earlier told Republica: “The practice of insuring trillions of rupees worth of goods and assets with few million rupees in the vault makes Nepali non-life insurers mere brokers of foreign reinsurance companies.”
Top 5 profit earners
Sagarmatha - Rs 94.91m
Shikhar - Rs 92.63m
Everest - Rs 49.27m
Himalayan - Rs 34.95m
Siddhartha - Rs 34.08m
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