Paid-up capital of insurance firms raised four-fold

Life Rs. 2b, non-life Rs. 1b

Kathmandu, Mar. 31: The Insurance Board (IB) has raised the paid-up capital requirement of insurance companies, both life and non-life, four-fold.

The IB Friday set the new capital standards for the insurance companies, which requires the life insurance companies to raise their paid-up capital to Rs. 2 billion from the current Rs. 500 million, and non-life insurance companies to Rs. 1 billion from Rs. 250 million.

All insurance companies operating in the country, including the branches of foreign companies, must fulfill the new requirement by the end of the Fiscal Year 2017/18, said IB chairman Chiranjibi Chapagain in a telephone interview with The Rising Nepal.

According to Chapagain, the IB has directed the insurance companies to submit their capital plan within three months.

"The companies have three options for increasing capital -- issuing bonus shares from their profits, issuing right shares and merger with other insurance companies," he said.

However, the IB may extend the deadline twice, of 3 months’ duration each, to raise the capital  of those companies that can't meet the capital requirement by the end of fiscal 2017/18.

Some companies may also have the luxury of another six months if the insurance sector regulator in the country deems so and allows them the extra period.

Chapagain said that the new provision was equally applicable to the branches of foreign insurance companies – Metlife, Oriental and National.

The branches of these three – one life and two non-life – are operating with small seed money, and they have to raise their assigned capital.

"The branches of foreign insurance companies can create joint ventures with the local companies," Chapagain remarked.

IB director Raju Raman Poudel said that the Board had directed the insurance companies to raise the paid-up capital in order to strengthen the industry and enable them to function well in the changing business environment.

The paid-up capital has become a heated issue for the last couple of years. After the IB, in the draft of the new Insurance Act, proposed hiking the capital of the life insurance company to Rs. 5 billion and non-life company to Rs. 4 billion, it had an instant impact on the stock market, and the share price of insurance companies went up dramatically.

After assuming the post, Chairman of the Board Chapagain had urged the investors to be cautious, and said that the capital of insurance companies wouldn't be raised to Rs. 4-5 billion - it would be far below that.

Poudel said that the proposed provision of raising the capital of insurance companies to Rs. 4-5 billion had been removed from the draft of the new act.

"The IB doesn't need an act to raise the capital of the companies. It can issue an order for the same whenever the market demands so," he said.

With a view to increasing the capital, the IB had already barred the insurance companies from distributing cash dividends.

There are nine life and 15 non-life companies in Nepal.

In the life insurance sector, Nepal Life Insurance Company has the highest paid-up capital with Rs. 2.16 billion and Rastriya Beema Sansthan has the lowest - Rs. 124 million - while in the non-life sector, Shikhar Insurance Company has the highest, Rs. 817 million, capital and Everest Insurance Company has the lowest with Rs. 101 million.

Paid-up capital of Insurance companies

Life-insurance companies

Company	Capital (Rs. in million)
Nepal Life	2,167
National Life	1,324
Life Insurance Company	1,069
Asian Life	671
Gurans Life	550
Surya Life	500
Prime Life	488
Rastriya Beema Sansthan	124
American Life (Metlife)	-

Non-life insurance companies

Company	Capital (Rs. in million)
Shikhar Insurance	817
Sagarmatha Insurance	538
NLG Insurance	512
Primier Insurance	448
Lumbini General	390
Himalayan General	385
Prabhu Insurance	385
Prudential Insurance	356
Siddartha Insurance	344
Neco Insurance	324
United Insurance	302
Nepal Insurance	287
NB Insurance	270
Everest Insurance	101