Supreme Court refuses to issue stay order on Insurance Board directive

KATHMANDU, Oct 7: The Supreme Court on Sunday refused to issue stay order on the insurance sector regulator´s move to introduce a directive on corporate governance that snatches away certain privileges previously enjoyed by chief executives and promoters of insurance companies.



A verdict in this regard was issued by a special bench of justices Girish Chandra Lal, Baidya Nath Upadhyaya and Bharat Bahadur Karki. [break]



The apex court made the ruling based on hearings that began last Thursday, following filing of a public interest litigation by one Mohan Lal Daruka.



Daruka, who claims to have stakes in several insurance companies, had claimed the latest directive went against the prevalent laws and was inflicting huge losses on insurance companies.



“It should, thus, be annulled immediately,” said the lawsuit filed against the Office of Prime Minister and Council of Ministers, the Ministry of Finance, the Insurance Board and Binod Aryal, executive director of the Board.



This was the second time a lawsuit was filed challenging the corporate governance directive issued by the Board. The Supreme Court had refused to issue a stay order on the previous occasion as well.



Sunday´s ruling has lent great support to the Insurance Board´s initiative to cleanse the country´s insurance market, which until now was operating haphazardly. To bring some order to this sector that has collected billions of rupees from the public in the form of insurance premium, the Board, in mid-Aug, had introduced a directive on corporate governance.



The directive, among others, puts a cap on remuneration of chief executives, bars insurance companies from generating business from promoters and prevents more than one member of a family from assuming post of board director in the same company.



Of these instructions, one provision that has created a hullaballoo is the ban put on insurance companies from generating business from their promoters or their family members.



Currently, most of the insurance companies, especially non-life, here are promoted by big corporate houses involved in businesses ranging from aviation to manufacturing. This has made it easier for these insurance companies to bag businesses, while preventing cash flight.



Insurers like United, Sagarmatha, Everest, Prudential, Himalayan General and Shikhar are all byproducts of this business tactic, which many insurers say has failed to create a level playing field for them in the market.

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