KATHMANDU, Jan 9: Most of the insurance companies are set to miss the extended deadline for raising their minimum paid-up capital.
Though the Beema Samiti – the insurance sector regulator – raised minimum paid-up capital for insurance companies by four-fold and provided them a deadline of mid-July last year, only five insurers have met the regulatory requirement so far.
There are a total of 39 insurers – 18 life insurance companies, 20 non-life insurance companies and one reinsurance company – in the country.
Those meeting the paid-up capital requirements within the deadline are Nepal Life Insurance Company Ltd, Shikhar Insurance Company Ltd, Himalayan General Insurance Company Ltd and Neco Insurance Company Ltd.
After most of the insurers failed to meet the minimum paid-up capital requirement, the Beema Samiti had extended the deadline by six months – two extensions of three months each – in line with the provision of the ‘Regulation on Insurer Registration and Operation of Insurance Business’ issued by the in March 2017. But, most of the insurance companies are still struggling to meet the minimum paid-up capital requirement even through the extended deadline is expiring on Monday.
As per the new capital requirement, life insurance companies will have to increase their paid-up capital to Rs 2 billion, while non-life insurance companies will have to raise such capital to Rs 1 billion. Currently, a life insurance company has minimum paid-up capital requirement of Rs 500 million, while such requirement for a non-life insurance company is Rs 250 million.
Sources say executives of insurance companies are lobbying with the Beema Samiti to provide them six more months to meet the paid-up capital requirement. However, the Beema Samiti is still undecided about its action against insurance companies that fail to meet the capital requirement.
Bema Samiti Chairperson Chiranjibi Chapagain told Republica that they are tracking indicators of all insurance companies to ascertain the progress that they are making toward complying with new capital requirement. He said that the Beema Samiti may take a decision of extending deadline for insurance companies by six months, until mid-July. But, he maintained that such deadline extension will be only on case-by-case basis for companies who faced delay due to implementation of new Nepal Financial Reporting Standards (NFRS).
Beema Samiti will start studying financial reports of insurance company after the deadline for raising capital expires on Monday.
“There was a delay in the process of meeting paid-up capital requirement for some insurance companies while adopting new Nepal Financial Reporting Standards (NFRS),” he added. “Insurers having adequate retained earnings will be instructed to carry out their annual general meeting by mid-July and raise their capital through bonus shares. The decision will be taken accordingly for those who do not have that capacity to raise capital through their earnings,” he added.
As part of phase-wise implementation of NFRS in companies of various sectors, insurance companies are moving toward NFRS convergence.
According to Beema Samiti officials, they are also mulling over directing insurance companies failing to meet the new capital requirement to go for merger and acquisition.
“We will do internal study of insurance companies that do not meet capital to see whether there is any crossholding. We will forcefully such companies into merger,” Chapagain had said at a program in July last year.