KATHMANDU, March 31: As the banking industry rushes to meet its new paid-up capital requirement by the mid-July 2017 deadline, insurance companies too were told Friday to raise their own paid-up capitals and given about 15 months to do so.
A board meeting of Beema Samiti -- the insurance sector’s regulatory authority -- held on Friday decided to raise the minimum paid-up capital requirement for both life insurance and non-life insurance companies by four times.
Each life insurance company will have to increase its paid-up capital to Rs 2 billion while a non-life insurance company will have to raise its paid-up capital to Rs 1 billion by mid-July 2018. Currently, a life insurance company has a minimum paid-up capital requirement of Rs 500 million and while for a non-life insurance company, the minimum requirement is Rs 250 million.
“The Beema Samiti has decided to raise the paid-up capital of insurance companies by four folds. The decision was taken based on rigorous discussions and consultations with stakeholders,” Chiranjibi Chapagain, the chairperson of the Beema Samiti, told Republica.
In line with domestic insurance companies, the insurance market regulator has also raised the assigned capital for branches of international insurers operating in Nepal. According to Beema Samiti officials, branches of international life insurers will have to raise their assigned capital to Rs 2 billion while branches of international non-life insurers will have to raise such capital to Rs 1 billion.
While there were already expectations that paid-up capital requirement for insurers -- who have been operating with a very low capital base -- was going to be raised through an amendment in the insurance law, the Beema Samiti has decided to remove the provision of paid-up capital from the proposed draft of the amendment in the law and raise it through a directive to insurance companies.
Beema Samiti officials say the decision to issue a directive instead of amending the law was taken to prevent speculations from taking their toll on the stock market.
“As it may take some time for the insurance act to be amended, we thought a handful of investors could start speculating and take undue advantage in the pretext of the possible rise in paid-up capital,” Shreeman Karki, a director at the Beema Samiti, said.
to data from the Beema Samiti, the insurance industry as a whole has Rs 35 billion in paid-up capital. This will increase to Rs 140 billion by mid-July 2018 if all insurance companies meet the new requirement. There are nine life insurance companies and 17 non-life insurance companies in the country.
of the insurance businesses have lauded the decision of the Beema Samiti.
“The decision of the regulatory body is logical and reasonable. With the rise in the business of all insurance companies, they should raise their capitals to minimize risk,” Vivek Jha, CEO of Nepal Life Insurance Company Ltd (NLIC), said. He said that NLIC had already met the newly unveiled paid-up capital requirement as its paid-up capital currently stands at Rs 3.09 billion.