KATHMANDU, July 13: Similar to microfinance institutions that cater financial needs of low-income and rural individuals or groups, the government is preparing to license microinsurance companies that will bring plans to provide coverage to people of low-income groups and low-valued assets.
The government has proposed the provision in a bill to amend and integrate the act related to insurance that was registered at the secretariat of federal parliament on Thursday.
According to the proposed Insurance Act, 2018 that will replace the existing Insurance Act, 1992 after is approved by the federal parliament, the insurance regulatory authority can issue a separate license for companies that provide microinsurance services.
Apart from allowing operation of separate microinsurance companies, each insurance company will also be required to reach out to low-income groups and rural areas to provide microinsurance services.
Those microfinance insurance companies can be issued license either for micro life insurance service and micro non-life insurance services. Such microinsurance companies will have to pay 0.5 percent of total premiums collected after selling insurance policies to the insurance regulatory body as regulatory fees.
In the bill, the government has proposed to set up Nepal Insurance Authority as insurance regulatory body. Currently, Beema Samiti is the sole regulator of insurance market of the country.
The authority will have a five-member board of directors. Executive chairman of the authority will be appointed by the government.
The bill also lays down the process of declaring any insurer a problematic company as well as the measure of corrective action. It also includes a separate chapter on merger and acquisition in the insurance industry.
Liquidation process of any insurance company, provision of setting up catastrophe fund by each insurance company and establishment of reinsurance company are the other highlights of the new bill.