IB mulling over enforcing ‘risk-based capital’ framework for insurance companies

Published On: January 28, 2022 07:15 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Jan 28:  The Insurance Board (IB) is making the insurers maintain a ‘risk-based capital’ by 2024.

According to an official of the IB, the regulator has started talks with the insurers concerned to implement the provision. The board, in this regard, is formulating necessary mechanisms with support from the World Bank.

The risk-based capital requirement is a statutory minimum amount of capital that the insurance companies need to maintain in order to address the inherent risk that could arise while mobilizing the financial assets. As of now, the related framework is being implemented in the banking and financial institutions.  

Aiming to minimize the possible flaws in the financial accounting system, the IB since last year has enforced the Nepal Financial Reporting Standards, a globally used accounting system, in the insurance businesses. The regulator has also been pressing the insurers to increase their paid-up capital to increase their capital base. For this purpose, the IB has barred insurance companies from distributing cash dividends to their shareholders. 

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