Nepal’s very first reinsurance company is readying to be operational before the end of the fiscal year.
The process of transforming Insurance Pool Nepal to a reinsurance company is in full swing to meet the deadline of mid-July, 2014. The Insurance Board had directed the Pool’s management and the board to initiate the conversion process almost two years ago to curb the outflow of reinsurance premiums to foreign countries.
“The Pool’s Due Diligence Audit (DDA) has already been undertaken, and we have to receive the final report,” informed CEO of Insurance Pool Nepal Ramesh Lamsal.
“The DDA report will confirm the share of each shareholder and the actual financial state of the Pool, and once the report is presented by the auditors we can decide the course of action and also settle on the exact capital structure of the new company,” he added.
The Pool has more than Rs two billion as of now that was accumulated since it began operations almost a decade back. It had started operations with a total capital of Rs 110 million when it was established in 2003.
It was established during the peak of the Maoist insurgency to protect domestic insurance companies. Foreign reinsurance companies had declined to reinsure policies issued by Nepali non-life insurance companies to cover physical damages caused by the insurgency. To cover such policies, the then government, insurance regulator and non-life insurers decided to start the Pool that would cover the claim settlements of policies categorised under riot, sabotage, malicious damage and terrorism.
“We will begin the operation with a paid up capital of a little over Rs two billion with half the stake of government and half from the 17 existing non-life insurers,” said Lamsal. But the company will raise additional 30 per cent of the capital from the public and other strategic partners as it will have authorised capital of Rs five billion.
“It will become a reinsurance company once it gets registered under the Company’s Act as a corporate entity,” he added.
The need for a local reinsurance company was stated by a study conducted by a taskforce two years back to control the outflow of reinsurance premium that is paid to foreign companies. Nepali insurance companies are paying about Rs 2.5 billion annually as reinsurance premium. The insurance companies transfer the risk they are covering for the policies by paying a premium to the reinsurance company. Domestic companies only retain a marginal portion of the risk and the rest is reinsured.
“Though we hope to minimise the amount being sent from Nepal as reinsurance premium, we cannot expect the soon-to-be opened reinsurance company to retain all the risks of Nepali insurance companies as it will not be viable,” pointed out chairman of Insurance Board Dr Fatta Bahadur KC.
“We hope to make the Nepali reinsurance company able to undertake reinsurance of the policies from foreign insurance companies as well,” he added.
Source: The Himalayan Times, 11 Dec 2013
The process of transforming Insurance Pool Nepal to a reinsurance company is in full swing to meet the deadline of mid-July, 2014. The Insurance Board had directed the Pool’s management and the board to initiate the conversion process almost two years ago to curb the outflow of reinsurance premiums to foreign countries.
“The Pool’s Due Diligence Audit (DDA) has already been undertaken, and we have to receive the final report,” informed CEO of Insurance Pool Nepal Ramesh Lamsal.
“The DDA report will confirm the share of each shareholder and the actual financial state of the Pool, and once the report is presented by the auditors we can decide the course of action and also settle on the exact capital structure of the new company,” he added.
The Pool has more than Rs two billion as of now that was accumulated since it began operations almost a decade back. It had started operations with a total capital of Rs 110 million when it was established in 2003.
It was established during the peak of the Maoist insurgency to protect domestic insurance companies. Foreign reinsurance companies had declined to reinsure policies issued by Nepali non-life insurance companies to cover physical damages caused by the insurgency. To cover such policies, the then government, insurance regulator and non-life insurers decided to start the Pool that would cover the claim settlements of policies categorised under riot, sabotage, malicious damage and terrorism.
“We will begin the operation with a paid up capital of a little over Rs two billion with half the stake of government and half from the 17 existing non-life insurers,” said Lamsal. But the company will raise additional 30 per cent of the capital from the public and other strategic partners as it will have authorised capital of Rs five billion.
“It will become a reinsurance company once it gets registered under the Company’s Act as a corporate entity,” he added.
The need for a local reinsurance company was stated by a study conducted by a taskforce two years back to control the outflow of reinsurance premium that is paid to foreign companies. Nepali insurance companies are paying about Rs 2.5 billion annually as reinsurance premium. The insurance companies transfer the risk they are covering for the policies by paying a premium to the reinsurance company. Domestic companies only retain a marginal portion of the risk and the rest is reinsured.
“Though we hope to minimise the amount being sent from Nepal as reinsurance premium, we cannot expect the soon-to-be opened reinsurance company to retain all the risks of Nepali insurance companies as it will not be viable,” pointed out chairman of Insurance Board Dr Fatta Bahadur KC.
“We hope to make the Nepali reinsurance company able to undertake reinsurance of the policies from foreign insurance companies as well,” he added.
Source: The Himalayan Times, 11 Dec 2013
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