KATHMANDU, April 2: Five new insurance companies have been in a race to receive operating licenses at a time when the government is looking for taking the existing insurers to merger with an aim to minimize unhealthy competition in the insurance business.
According to the Insurance Board (IB), three life insurance and two non-life insurance companies have been awaiting operating licenses. While Uni Life, Standard Life and Suva Life are the three life insurance companies, Annapurna Insurance and Abhiyaan Insurance are the applicants in the non-life type.
Currently, there are 19 life insurance and 20 non-life insurance companies operating in the country. Of them, 10 life insurers and three non-life insurers obtained their licenses during the tenure of the then IB Chairman Chiranjibi Chapagain, who turned lenient to provide licenses to new companies that were put on hold by former IB Chairman Fatta Bahadur KC.
Unilife and Standard Life were also in the lists when the IB issued new licenses four years ago. However, these companies failing to meet the criteria set by the regulator were unable to get licenses at the time. Now, these insurers are lobbying with the Ministry of Finance to get new licenses, according to the IB officials.
Targeting to strengthen the capital base of insurers and to check the number of insurance companies in the country, the regulator in April 2017, raised the paid-up capital requirement for insurers by four-folds. While life insurers were asked to increase their paid-up capitals to Rs 2 billion from Rs 500 million, non-life insurers had to increase their capital to Rs 1 billion from Rs 250 million.
Many insurance companies made their toe to toe effort to meet the requirement just two years ago, after repeated caution notices issued by the regulator. Apart from the capital requirement, insurance companies vying for a new license need to submit a detailed report on fixed assets, new plan on insurance policy, management expense, capital structural report, fundamental strategy to sustain in the insurance market and financial plan for at least five years.
The IB itself is often criticized for not being able to monitor properly the existing insurance companies. “Issuing licenses to too many firms raises the possibility also for increasing anomalies at the given supervision capacity of the regulator,” said an IB official on condition of anonymity.