NIA tightens oversight with directives on investment and foreign currency

Kathmandu, Sept. 3

The Nepal Insurance Authority (NIA) has introduced two major directives to strengthen regulatory oversight and promote transparency in the insurance sector. The newly issued guidelines, Investment Directive, 2082 and Foreign Currency Exchange Recommendation Directive, 2082, apply to life, non-life, micro-insurance, and reinsurance companies operating in Nepal.

The Investment Directives issued on Tuesday, September 2, mandates all insurers to operate under a formal Investment Policy, approved by their respective boards.

The directive encourages investment in secure areas, promotes diversification, and ensures proper asset-liability matching. It also seeks to strengthen internal control and risk management systems within insurance companies.

Key provisions of the Investment Directives include allowing unrestricted investments in government securities and Nepal Rastra Bank-issued bonds. With prior approval, life, non-life, and reinsurance companies may invest up to 5 per cent of their total investments in sectors like agriculture, warehousing, energy, education, and health through subsidiary companies.

However, board members of insurers and their immediate family members are barred from holding management or board positions in these subsidiaries.

Insurers are also required to conduct property revaluation every three years, maintain daily investment limits, and submit quarterly investment reports to the authority.

Likewise, all fixed deposits must be earmarked under the NIA’s name if held at licensed banks, financial institutions, or infrastructure development banks.

Similarly, the Foreign Currency Exchange Recommendation Directive aims to bring transparency and order to the process of converting Nepali currency into foreign exchange for payments related to reinsurance, retrocession, and foreign consultancy services.

Insurers must now obtain prior approval from the Authority for such payments, whether made directly to foreign reinsurers or through brokers.

Insurers must also adhere to existing foreign exchange laws and submit supporting documentation for reinsurance fees, claims, consultancy charges, and software payments. The directive further specifies that foreign currency requests will only be recommended for reinsurers listed and rated in accordance with the NIA’s Reinsurance Guidelines. Companies are required to keep all relevant documents for at least five years and submit a detailed foreign currency utilisation report within 15 days after each fiscal quarter.

Published in The Rising Nepal daily on 4 September 2025.