Although the Insurance Board (IB) has planned to increase the minimum paid-up capital requirement for insurance companies by the end of the first quarter of 2013-14, a majority of the insurance companies are yet to submit their capital plan to the board.
The board had earlier directed life and non-life insurance companies to increase their paid-up capital to Rs 500 million and Rs 250 million, respectively, by mid-July, 2013.
Of the nine life insurance companies, only Gurans Life Insurance and Rastriya Beema Sansthan (RBS) are left to submit their capital plans, but none of the non-life insurance companies have forwarded their plans.
"Those who have submitted their plans intend to issue bonus shares," said Santosh Prasai, chartered accountant at the board. "Many of them have already issued bonus shares, while some have acquired the the Securities Board of Nepal's (SEBON) approval for the same."
According to the IB, seven life insurance companies have received approval from the SEBON for issuing bonus shares worth Rs 785.89 million. Among these, LIC, Prime Life, Asian and Surya have also planned for an advance call worth Rs 153.16 million from their promoters.
Prasai said Gurans' board has committed to increase its capital within the next three months.
In a bid to pressure insurance companies to increase their capital, the IB has also issued the merger guideline that talks about forcibly guiding companies with poor performance to merger.
With the non-life insurances companies still ignoring the IB's directive, the board has started holding consultations with them. "We have started consultations with individual companies—mainly non-life insurance companies that have failed to meet deadline—on how they could increase their paid-up capital shortly," said Prasai.
Currently, there are 25 insurance companies operating in the country, of which 16 are non-life insurance companies. The government-owned RBS is allowed to do both life and non-life business. But the IB has asked RBS to split into two companies for life and non-life insurance business, according to Prasai.
In case of non-life insurance companies, the IB will ask their promoters to inject capital. "The promoters have expressed commitment to put in necessary funds within the next 15-20 days," Prasai added.