BANEPA, July 7: Beema Samiti -- the insurance sector regulator -- has said that it will direct insurance companies that fail to meet the new paid-up capital requirement within the specified deadline to pursue merger.
Speaking at an interaction organized jointly by the Beema Samiti and Society of Economic Journalists- Nepal (SEJON) in Banepa on Friday, Beema Samiti Chairman Chiranjibi Chapagain said that companies who fail to raise the their minimum paid-up capital within the deadline will be directed to go for merger to increase their capital base. “Beema Samiti will take both forceful and encouragement approaches,” he added.
Following the footsteps of the Nepal Rastra Bank (NRB), the Beema Samiti in March last year decided to raise the minimum paid-up capital requirement for both life and non-life insurance companies by four times. Insurance companies have until mid-July this year to raise their minimum paid-up capital prescribed by the Beema Samiti.
However, only four insurance companies have raised their paid-up capital to the required level so far. According to Beema Samiti, Nepal Life Insurance Company, Shikhar Insurance Company Ltd, Himalayan General Insurance Company Ltd and Neco Insurance Company Ltd have met their minimum paid-up capital requirement, while most of the insurance companies have submitted their capital plan.
Beema Samiti has set minimum paid-up capital for life insurance companies to Rs 2 billion, while such requirement for non-life insurance companies is Rs 1 billion.
Currently, paid-up capital requirements for life and non-life insurers stand at Rs 500 million and Rs 250 million, respectively.
Though the deadline to meet the new capital requirement is mid-July, 2018, Beema Samiti can give insurers six more months -- three months twice -- to raise their paid-up capital to the required level if they come up with ‘proper justification’.
While the Beema Samiti brought a directive on merger and acquisition of insurers some five years ago, there has not been any amalgamation in the insurance sector yet.
However, the Beema Samiti is planning to push those insurers into merger and acquisition process whose promoters have cross-holding of ownership.
“We will do internal study of insurance companies who do not meet the capital to see whether there is any cross-holding. We will forcefully send companies, where there is any direct or indirect cross-holding, into forceful merger,” said Chapagain.
He also said that the insurance market regulator will also review and update the M&A directive to incentivize insurers going into the amalgamation process.
“Our objective is to reduce the number of insurers even if all insurance companies meet the new minimum paid-up capital requirement,” added Chapagain.