Nepal has got its first reinsurance company, which is expected to help curb massive fund outflows for reinsurance purposes.
The company, which has a paid-up capital of Rs 2.1 billion and authorised capital of Rs 5 billion, will be formally launched in a few days. “An office has already been set up and we will formally inaugurate it soon,” said Finance Minister Ram Sharan Mahat at a press meet at the Finance Ministry on Sunday.
The office is based at Battisputali, Old Baneshwor, in Kathmandu.
The reinsurance company will succeed the Insurance Pool. The Pool was set up in 2003 with a 50 percent equity participation of the government and the rest of insurance companies, mainly non-life companies, to cover damages caused by terrorism. The pool was formally converted into the reinsurance company on November 7.
CEO Ramesh Lamsal said the new company would help save around 20 percent of the money going abroad for reinsurance purposes. He estimates Rs 8-10 billion goes abroad annually for the purpose.
According to the Insurance Board, most of the Nepali insurers buy reinsurance policies from reinsurers in India, Malaysia, Singapore and some African countries.
The government has a 45 percent stake in the newly-formed company, while 17 non-life insurers have the rest. “We also plan to take life insurance companies on board offering them a 18 percent stake,” said Lamsal. “Once they become shareholders, the current share structure will change.”
The Cabinet had, some three months ago, given its go ahead for the insurance Pool to carry out reinsurance business. Establishing such a company had been in the government’s priority for the last few years, and the budget for this fiscal year had also talked about the same.
With the Insurance Pool no longer relevant in the changed context after the end of the conflict, the government planned to convert it into a reinsurance company. Ever since the Maoists entered the mainstream politics, losses caused by terrorism-related incidents have come down drastically.
A chief executive officer of a leading insurance company said the establishment of the reinsurance company would help prevent a large amount of money from going outside the country.
“At a time when a large amount of premium raised from high-risk businesses is going outside, the reinsurance company can help retain the premium,” said the official, citing only 0.05 percent and 25 percent of premium in aviation insurance and fire insurance, respectively, are retained.