The move comes at a time when insurance companies, both life and non-life, have reported impressive profits in the fourth quarter of 2012/13.
According to the statistics of Insurance Board, premium payment made to foreign reinsurance companies increased seven-fold to Rs 2.25 billion in 2010/11 from Rs 303 million of 2006/07.[break]
Officials say the government is planning to convert Insurance Pool Nepal (IPN) - a joint venture between the government and 17 non-life insurance companies - to a reinsurance company. The government owns 45 percent stake in IPN and rest is jointly owned by the non-life insurance companies.
The IPN has been covering the risk of insurance companies emanating from loss in property of policyholders due to strikes, vandalism and terrorist activities.
“By establishing a reinsurance company, we aim to reduce premium payment to foreign reinsurance companies by 15 to 20 percent in the initial years. We will increase the capacity of the reinsurance company gradually,” Ramesh Lamsal, chief administration officer of IPN, told Republica.
If things go as planned, IPN will operate from the beginning of the next fiscal year as by-laws for the proposed company is at the final stage. Similarly, due diligence audit of the IPN is underway.
“The IPN currently has capital base of Rs 1.5 billion. We aim to increase it to Rs 5 billion so that it will be able to absorb more shocks,” Lamsal said. “We will ask both the government and insurance companies to increase their investment.”
The government had established IPN in 2004 at the height of the Maoist insurgency. As Nepali insurance companies have low shock absorbing capacity, they have been reinsuring with foreign companies to share the risk.
According to IB officials, insurance companies have been buying reinsurance policies from companies from India, Malaysia, and Singapore among others.
“We have the target of extending reinsurance services to neighboring countries as well, said Lamsal.
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