Everest Insurance reopens under IB management

KATHMANDU, DEC 06 - 

Everest Insurance has resumed operations after a break of several months since it was taken over by the Insurance Board (IB). According to the IB team looking after the management of the non-life insurance company, it is back to business as usual. 

IB Deputy Director Kundan Sapkota said they had recently renewed the agreement with General Indian Corporation of India for reinsurance of fire-related claims. We have been selling fire insurance since last week, he said. 

The IB took over Everest Insurance after its management stopped normal business activities for several months. It dissolved the company board and suspended the chief executive officer before sending a three-member team to take over the management. 

The IB team said they had been successful in clearing over 400 claims worth Rs 10.9 million in the last two months after they took over the management. Beside these, we have approved and forwarded a number of Discharge Vouchers to Everest Insurance clients waiting for their final approval in settling the claims, he said. 

Of the total claims pending, more than half were related to automobiles. 

Similarly,

IB makes bundling of earthquake, fire insurance policies mandatory

KATHMANDU, JUL 11 - 2013

The Insurance Board (IB) has made it mandatory for insurance companies to bundle earthquake and fire insurance policies into a single package. Until now, there was no separate legal provision on earthquake insurance coverage.

Issuing a directive, the IB has also slashed fire and earthquake insurance premiums by 10 percent each. “As those buying fire insurance policies will also have to pay an additional amount for earthquake coverage, the premium has been slashed,” said IB Director Sriman Karki.

In the one and half months, Nepal witnessed half dozen earthquakes, according to the Department of Mine and Geology.

As damages caused by earthquake are usually high, beneficiaries of earthquake insurance have to share the cost of damage — whichever is low among 2.5 percent of the insurance amount or Rs 1 million. Rest of the cost is borne by the insurers. “The cost of damage to be borne by the beneficiaries has been kept as low as possible,” said Karki.

The board has also made it mandatory the inclusion of coverage of damages caused by strikes, civil unrest and hooliganism (risk group) in accident insurance policies. Earlier, insurance coverage for risk group was voluntary and only a few bought such coverage.

As the inclusion of the risk group insurance would increase the cost for accident insurance, the insurance sector regulator has also slashed the risk group insurance premium. For the insurance amount up to Rs 1 million, the premium has been slashed to 10 paisa per Rs 1,000. Earlier, it was 50 paisa per Rs 100,000.

In the case of the insurance amount exceeding Rs 1 million, the premium has been fixed at 25 paisa per Rs 1,000. “The premium has been kept a little higher for bigger insurance amounts as those who seek coverage of higher amount usually have higher capacity to pay the premium,” said Karki.

The board has also made it mandatory for banks and financial institutions (BFIs) to cover risk group while giving accident insurance coverage facility to their depositors. They have to pay an additional Rs 5 in accidental insurance premium for insurance amount up to Rs 500,000. It has been put at Rs 10 for insurance amount up to Rs 1 million.

For the insurance amount exceeding Rs 1 million, BFIs have been told to take approval from the board. In case of the coverage of the risk group under the fire insurance, the premium has been slashed by additional 20 percent through the new circular. After the end of the Maoist conflict, the IB had earlier slashed the premium by 35 percent.

The board has also fixed the premium for insurance coverage of optical fibre which is laid for telecommunication services. The rate has been fixed at Rs 15 paisa per Rs 1,000 insurance amount.

“It is the first time that we have fixed premium rate for optical fibres as per the insurance companies’ demand,” said Karki.

Nepal Telecom, NCell, United Telecom Limited and few internet service providers have laid optical fibres.

The IB has also directed insurance companies to slash insurance premium by 10 percent provided any individual or institution (including risk group) comes directly to take insurance coverage. In such a case, insurance agents should not be given commission.

Source: The Kathmandu Post

Transport entrepreneurs hinder plan to raise passenger insurance coverage

KATHMANDU, March 6, 2013

A plan to raise insurance coverage for every passenger traveling on public vehicles to Rs 500,000 is not likely to see the daylight as transport entrepreneurs have denied to sit for talks unless the government ensures proper enforcement of Motor Insurance Directive 2009.

The Insurance Board, the insurance sector regulator, had some time ago floated the idea of raising passenger insurance coverage from existing Rs 100,000 to Rs 500,000. The proposal was tabled to provide relief to people traveling on public vehicles and curb anomalies taking place in third-party insurance, under which compensation of Rs 500,000 is provided if an insured vehicle causes damage to properties and human lives that are outside of the vehicle.

The regulator then started holding talks with insurance companies and transport entrepreneurs to determine a premium rate for the coverage.

But soon after the talks began, transport entrepreneurs started voicing their objection.

“At a time when the government has not been able to properly implement motor insurance directive launched in 2009, proposal to make amendments to it is simply illogical,” said Dol Nath Khanal, general secretary of the Nepal Transport Entrepreneurs National Federation - an umbrella body of transport entrepreneurs which was leading talks with the Insurance Board.

His main concern was delay made by insurance companies in settling claims. “We have to wait for months to get the compensation and on top of that police make us pay more than the sum insured to settle disputes related to third-party claims,” Khanal claimed.

“If the government is able to effectively implement the directive for at least six months, we will do whatever the Insurance Board tells us to do,” Khanal said.
Talking to Republica earlier in November, Khanal had, however, cited extra amount that transport entrepreneurs will have to fork out to pay annual premium as the reason for their inability to accept the government´s proposal.

Currently, transport entrepreneurs are paying annual premium of Rs 150 per seat to insurance companies to provide passenger insurance coverage of Rs 100,000. Once the coverage is raised to Rs 500,000, per seat annual premium amount is expected to go up to a range of Rs 300 to Rs 400.

“Such a raise will definitely affect our profitability and put us in a tight position,” Khanal had told Republica in November, adding, “We do not want the Insurance Board to raise the premium or the coverage amount for now as we are not in a position to bear such cost.”

The government sources, however, cited different reason for differences expressed by transport entrepreneurs.

“They actually want the accident coverage for drivers and helpers to go up along with hike in passenger insurance coverage,” a person privy to the issue told Republica.

Currently, drivers and helpers of public vehicles are covered with insurance of Rs 500,000 each, as against Rs 100,000 for passengers.

“We are told that entrepreneurs will come under pressure from unions of drivers and helpers if they agree to raise insurance coverage of passengers without making similar changes to insurance coverage of their workers. Raising coverage for drivers and helpers in a similar range is not possible as insurance companies will not agree to subsidize the premium cost for them. That´s why the Insurance Board´s plan has hit a roadblock,” the source said.

Jyoti Baniya, general secretary of Consumer Rights Protection Forum, was of the opinion that consumers should not be affected by the blame game that is going on.
Baniya, who was one of the members of public transport fare fixing committee, said: “Considering the fare that transport entrepreneurs are collecting, they won´t lose anything even if the passenger insurance coverage amount is raised to Rs 1 million.”

Source: Republica

Insurance Board brings anti-money laundering rule

KATHMANDU, JAN 10, 2012

Insurance companies from now on will have to keep a hawk-eye vigil on large insurance policy holders according to the new anti-money laundering directive issued by Insurance Board.

They have to keep a detailed report of non-life insurance policy holders who pay an annual premium exceeding Rs 300,000, and also of life insurance policy holders paying an annual premium more than Rs 100,000.

The freshly issued Anti-Money Laundering and Combating Terrorist Financing Directive 2069 for insurance companies has asked insurance companies to keep customer due diligence to prevent the use of insurance policies for money laundering activities.

Earlier in July 2010, Nepal Rastra Bank’s Financial Information Unit (FIU) had asked insurance companies, agents and surveyors to inform FIU regarding transactions exceeding Rs one million under the Anti-Money Laundering Act-2008.

The insurance regulator has asked the companies to perform the necessary customer due diligence (CDD) on customers, beneficial owners and beneficiaries. The companies have been asked to take enhanced measures with respect to higher risk customers and monitor and report complex, unusual large transactions, or unusual patterns of transactions.

Likewise, insurance companies have to maintain full business and transaction records, including CDD data for at least five years.

The company has to categorise customers based on their profile and product profile. Highly risky customers include already known criminals among others.

Risky customers include those residing in places infamous for money laundering and corruption, customers with ambiguous source of income, and those involved in an industry linked to possible money laundering.

Insurance companies have to identify the owner and majority stakeholders of the companies that they issue insurance policies to, in order to keep tabs on their clients. Money laundering refers to the act of legitimising the income earned from illegal activities such as arms and drugs trafficking or through terrorist activities.

Money launderers use valid financial channels all over the world to place and layer their ill-earned money and then integrate the money into legal channels. To avoid such activities, the Financial Action Task Force —an inter-governmental global anti-money laundering body — has made the enactment of anti-money laundering laws mandatory.

Since Nepal has committed to abide by FATF regulation, it has been enacting related laws and regulations to stop flow of black money through various channels.

Source: THT

IB, insurers at odds over new regulation

KATHMANDU, SEP 13 - 2012

Insurance Board (IB) and insurers are at odds over Corporate Governance Regulation 2012 aimed at depriving board directors from doing business with their own company and controlling the salary structure of chief executives.

Although such provision has already been introduced by the Nepal Rastra Bank (NRB) in the banking sector, it is new to the insurance sector.

Promoters of insurance companies argue the IB’s latest move will hit the entire business as the regulation was brought without prior consultation with them. After the IB prevented Khetan Group-promoted Everest Insurance from covering fire insurance, the highest premium earning sector in non-life business, it has stopped issuing new polices in all areas and limited its operation to just settlement of claims starting from Tuesday.

The IB had taken action against company, slapping its CEO Kewal Krishna Shrestha a fine of Rs 10,000 for making payment “illegally” to claims of Himalayan Snax, the manufacturer of Mayos noodles. The regulation prohibits insurers from giving coverage to the companies promoted by the same group.  The insurers, however, maintain that Everest’s action is a manifestation of the reservations the insurers have to the recent decisions of the board.

A member of Nepal Insurers Association (NIA) said that the insurers have raised serious reservation over some of the provisions of the regulation while supporting the Everest Insurance’s move. “Some clauses of the regulation conflict with the Insurance Act. The rift will grow further if they are not amended,” said an insurer, adding that more companies might follow the Everest suit—not to issue new policy.

According to them, one of the provisions that contradicts with the Act is the one that prohibits doing business with companies related to the directors of the insurance companies. Clause 15 of the Act says, “If the Insurer has made any dealing regarding the Insurance Business with its Director or his/her family or any corporate body where he/she is a Managing Agent or partner he/she shall provide a notice to the Board within thirty-five days.” Their claim the regulation cannot negate the provision of the Act. However, an IB official said that the regulator has the authority to impose such regulation under Clause 8 of the Act, which entitles the board to bring out policies to regulate the companies.

Insurance companies have also complained that regulation was brought without consulting the insurance companies. “The IB took decision on such an important issue without even a single consultation with us,” said a CEO of an insurance company, arguing that “the central bank had consulted with the bankers before bringing such regulation.”

The IB, however dismissed argument that they needed to consult with the insurers before introducing the regulation. “The regulation was not brought on ad hoc basis. We brought those policies only after adequate research and homework,” he said.    

Likewise, the insurance companies have reservation over the provision whereby the family member of board members or one having financial interest with the company is not allowed to be employed. The board, however, said that such provision was brought to avoid conflict of interest. “In order to ensure corporate governance, ownership and management of the company must be segregated,” said the IB source.

The insurance companies are also against the provision of limiting the salary and perks of CEO to 15 times the salary and perk of the employee at the bottom of the company hierarchy. “This provision will force some companies to cut the salary and benefit of their CEOs,” argued a member of NIA.

Also, the regulation has mentioned about the minimum academic qualification of the employees at different positions. “Making such provision falls under the jurisdiction of the company registrar office,” said a CEO of an insurance company.

Source: The Kathmandu Post

Beema Sansthan to face Insurance Board action

KATHMANDU, Sept 3, 2012

The Insurance Board, which has lately stepped up action against insurers violating norms set for the sector, has set its sights on the state-owned Rastriya Beema Sansthan.

The insurance sector regulator is contemplating action against the insurance company for running the business illegally without renewing its operating license in time.

The government-owned insurance company has failed to renew its license for few years now due to its failure to audit financial reports of the last several years. The state-owned company has also failed to establish life and non-life businesses as separate entities.

Calling these gross violations of rules, the Board had recently given a 15-day time to the company to clarify why it failed to comply with the regulator´s instructions. After the company could not furnish satisfactory explanation, the Insurance Board has now sought clarification on why the regulator should not take action against it.

“The notice issued last week has asked the company to submit answers within seven days . If not, the regulator can take severe action against it,” a high-ranking official of the Insurance Board told Republica on condition of anonymity.

According to Board officials, these actions may include temporary suspension of business activities to seizure of operating license.

Despite being a listed company, Beema Sansthan has not completed audits of its financial reports since fiscal year 2003/04 due to frequent change in top level staff and frequent protests by employees. This goes directly against the provision in the Insurance Act that specifically says insurance companies must have their balance sheets audited by an authorized chartered accountant within 10 months of completion of every fiscal year.

“Since its balance sheets are not updated it has become almost impossible for us to trace its investment and how premium amount collected from the public is being utilized,” the Insurance Board official said.

Acknowledging the mistake, Beema Sansthan Acting General Manager Omkar Nidhi Tiwari, during a gathering to mark the 45th anniversary of the company in February, had announced to complete these tasks “soon”.

At that time Tiwari had also promised to hold annual general meetings of 2003/04 to 2005/06 in mid-April and of another four years till 2009/10 by mid-April next year. But the company has failed to keep its promise.

In another instance, the insurer has also not separated its life and non-life businesses. This violates a law introduced more than a decade ago, which makes it mandatory for insurance companies operating both life and non-life businesses to create independent units to conduct their activities.

Following introduction of the law, National Life and General Insurance Company, for instance, which was conducting both life and non-life businesses, has already established National Life Insurance Company to conduct life insurance business and set up a subsidiary company called NLG Insurance to operate non-life insurance business.

Yet Beema Sansthan has been taking advantage of its status as government-owned company and continuing to run the business violating the rules set forth by the regulator.

“We cannot continue to tolerate this attitude of the company, which has set a bad example in the insurance sector,” the Insurance Board source said.

Source: Republica

IB mulling agro insurance strategy

KATHMANDU, AUG 13, 2012

The Insurance Board (IB) has been mulling introducing agro insurance in a bid to cover agricultural businesses and farming to help commercialise agriculture. According to senior IB officials, the scheme will be formulated considering certain agro businesses popular in the country like fishery, dairy, poultry and cultivation of cash crops, among others.

The strategy, which is expected to be issued by the end of the second quarter of the fiscal year, will broadly determine the premium, the extent of the coverage and the different sub-sectors that will be covered.

“Although 80 percent of the country’s workforce is engaged in agriculture, commercial farming is yet to happen in the country,” said Binod Aryal, executive director of the IB. “Launching such an insurance scheme will help insurance companies by developing new products besides increasing investment in agro businesses.”

The IB will also be introducing a micro insurance strategy which provides insurance coverage up to Rs 100,000. The IB has sent the proposed scheme to the government. The cabinet is yet to give final approval.

The proposed insurance protection will not cover other agricultural production, especially commercial production. Deposit and Credit Guarantee Corporation has, however, given insurance coverage to the loans provided to small farmers by banks and financial institutions.

Businesses have been citing lack of agricultural insurance as the reason behind their reluctance to venture into the agriculture business. They have repeatedly pointed out that the risks associated with agricultural production needs to be mitigated through insurance in order to lure investments in the sector. Similarly, banks and financial institutions have said that lack of agricultural insurance has prevented them from extending loans to the sector.

Meanwhile, a 2009 study carried out by the World Bank (WB) pointed out that stagnation in the agricultural sector was the major reason behind the underdevelopment and poverty in the country and identified the need for innovative financial products to assist farmers in the management of agricultural production and thus contribute to increasing farm productivity.

The study entitled Agriculture Insurance Feasibility Study in Nepal has  stated that insurance can facilitate access to agricultural credit on better terms as it increases the creditworthiness of farmers and other agents of the farm sector.  Aryal said that the regulator was aware of the problems bedevilling the farm sector, therefore, they were keen to introduce the insurance guidelines.

IB chairman Fatta Bahadur KC said a high level-team led by the agriculture secretary was also preparing a procedure for agricultural insu-rance. “It will be drafted in such a manner that insurance companies will be interested in introducing different products under it,” said KC.

Source: The Kathmandu Post

Insurance agents protest IB cap

KATHMANDU, AUG 12: 

Insurance agents and insurers are trying to get the regulator to revoke the cap on incentives, but the insurance regulator is unlikely to oblige.

“We are holding discussions with insurance companies to figure out the best possible way so that thousands of agents do not suffer,” said secretary of Life Insurance Agents Association of Nepal Krishna Prasad Acharya.

Starting from the current fiscal year, the Insurance Board (IB) had dictated that incentives being provided to insurance agents along with business promotion should be limited to a maximum of six per cent of the annual gross premium income.

Calling the cap on their incentives impractical, the life insurance agents have stopped taking new clients as a protest against such limitations. “However, we are yet to call for a widespread strike. At present, agents are not taking any new clients voluntarily to express their discontent, but if things do not work out we might opt for a strike,” pointed out Acharya.

“Though not all agents have stopped selling policies, the number of policy sales has

definitely been affected due to the ongoing protest,” said chief executive of PrimeLife Insurance Company Restha Jha.

The insurance regulator capped the incentives being doled out by insurance

companies to their agents to bring down the expenses of the firms, as the financial burden had started to strain their income.

“We decided to cap the incentive, especially, to curb the tendency of agency system that hires sub-agencies to bring in more clients. Such a multi-layered agency system had resulted in companies
 paying more to the agencies besides the commission,” said chairman of IB Prof Dr Fatta

Bahadur KC. 
Though the general agency system for insurance marketing is widely accepted worldwide, the regulator is wary about increasing costs to maintain such insurance agents.

IB has already fixed the commission rate that agents can be paid based on the maturity period and type of policies ranging from 10 per cent to 25 per cent of the total premium amount. In addition to the commission rate, the insurance companies have been paying more as incentives mostly to retain the agents.

“In some cases, companies were found to have spent 92 per cent of the first year’s premium income to pay for agents, and if this trend persists, companies will be in trouble in the long run,” he added.

There are about 90,000 licensed insurance agents working in the Nepali life insurance market for nine life insurance companies, along with about 1000 non-life insurance agents.

Source: THT

Insurance agents protest new regulation

KATHMANDU, AUG 2, 2012

Insurance agents have stopped taking new clients to protest against the regulator’s latest move of capping their incentives.

Insurance Board had dictated the incentives being provided to insurance agents along with business promotion to a maximum of six per cent of the annual gross premium income, starting from the current fiscal year.

Insurance agents –– both life and non-life –– are on strike from July 16 and have not sold any insurance policies from the day the circular was implemented, demanding the regulator to revoke the decision.

“We have decided to stop selling policies until the board withdraws the limit on our incentives,” said secretary of Life Insurance Agents Association of Nepal Krishna Acharya.

The insurance regulator has capped the incentives being doled out by the insurance companies to insurance agents in order to bring down the expenses of the companies. It had put a limit on such expenses and incentives as the financial burden for the companies had started to strain the income of the companies.

“Commission is for selling policies while incentives are remuneration for agents’ bid to create awareness among prospective buyers which in turn expands a company’s business,” Acharya pointed out, adding that incentives does not amount to about 1.3 per cent of the total premium income which is not a large sum that will put pressure on a company’s profit.

The Insurance Board has

already fixed the commission rate that insurance agents are supposed to be paid based on the maturity period and the type of policies from 10 per cent to 25 per cent of the total premium amount.

“Due to the fierce competition between the companies to retain agents and in turn their clients, companies have been giving away higher amounts as incentives, which minimises the return on the insurance policies thus victimising the beneficiaries,” said an official of the Insurance Board .

The companies were giving away large sums of money as incentives to retain their insurance agents as instances of agents defecting to other companies for better perks had started to rise recently.

“Moreover, the insurance regulator took the decision

to cap incentives and unnecessary expenses of the insurance companies to ensure that

they are not short of funds

to pay the claims,” added the board official.

There are about 90,000 licensed insurance agents working in the Nepali insurance market for 25 insurance companies. There are 26 financial institutions and cooperatives that have licence to work as insurance agents.

Source: THT

IB all set to issue good governance guideline

KATHMANDU, JUL 22 -

The Insurance Board (IB) is all set to prohibit directors and promoters with larger stakes in insurance companies from getting insurance coverage from their own companies for their business es and property.

The regulator will put in place the provision through the ‘good governance’ guideline which it plans to issue shortly.

A senior IB official said the move came after some directors and promoters were found getting insurance coverage for their business es from their own company without paying premiums. “They were also found taking away huge claims for minor damages,” said the official.

IB will set a certain shareholding percentage mark, and promoters/directors owing shares above the mark cannot get insurance coverage from their companies. The guideline will also remove the post of executive chairman, managing director and executive director in insurance companies. “Presence of these posts created governance-related problems as a single person is all powerful and has the authority to run day-to-day business ,” said the official.

The Nepal Rastra Bank (NRB) has also banned the appointment of executive chairman in banks and financial institutions, given most of the financial institutions that faced trouble were managed by executive chairmen.

The IB’s guideline will also ban directors from taking membership of multiple sub-committees within the board.  NRB has also banned banks and financial institutions from creating more than three sub-committees — risk management, audit and staff management — and each of the sub-committees should be led by non-executive board members; the chairman of the board cannot get involved in the panels; and the coordinator of a sub-committee cannot head another.

IB will also cap the salary of chief executive officers of insurance companies, keeping a certain range between the salary of the lowest ranking employees and the CEO. It will also fix the qualification of CEO. “For this, we are planning to ban promoters or anybody having 1-2 percent stake in the company from becoming CEO,” he said.

Source: The Kathmandu Post

Insurers told to reduce number of unsettled claims by half

KATHMANDU, May 28, 2012

The Insurance Board has instructed all non-life insurance companies to reduce the number of unsettled claims by half within the next six months after a deluge of compensation-claim applications remained unapproved for months, and even years, upsetting customers who had bought policies in hope of being rescued at times of trouble.

The insurance sector regulator issued the instruction by calling CEOs and claim department chiefs of 16 private non-life insurers, that insure cars to cargos, to its head office in Chabahil.

“We had to issue the order after we found that many companies were simply harassing their clients by not honoring valid compensation claims and releasing payment on time,” Binod Aryal, executive director of the Board, told Republica, adding,“Such practices will not be tolerated anymore”.

He also warned of action against companies if they fail to settle outstanding claims within next six months. He, however, did not mention the kind of “action” the Board is planning to take.

Data compiled by Republica show that 14 publicly-listed non-life insurance companies have piled up 19,296 unsettled claims worth Rs 2.57 billion till the first nine months of the current fiscal year - up 25.6 percent in terms of number and 39 percent in terms of amount from nine-month period of last fiscal year.

The other two non-life insurers, which are not listed in the stock market - National Insurance and The Oriental Insurance - have 665 and 800 unsettled claims, respectively, to their names, according to data provided by the Board.

The order issued by the Board means non-life insurance companies will have to fork out over Rs 1 billion to settle more than 10,000 claims by November.
“I don´t think this is impossible,” Aryal said. “All they (insurers) need to do is add more staff to the claim department if they are facing shortage of human resources to settle insurance claims on time.”

The Insurance Board, during a recent survey, had found that most of the claims waiting to be settled incorporated motor-vehicle insurance claims.

Although statistics on the overdue amount are not available, the Board said even small payments of less than Rs 20,000 were kept pending for years.

“What was even more disturbing was the practice of pestering clients time and again to submit various documents under the pretext of investigation,” an official of the Board had told Republica on condition of anonymity last week. “This shows dominance of unprofessional management at insurance companies.”

Source: Republica

Insurance Pool to be converted into reinsurance company

KATHMANDU, MAY 28, 2012

The Insurance Board has initiated the process of transforming Insurance Pool, Nepal into a reinsurance company. Following consultations with the Finance Ministry and the pool, the board has formed a committee headed by Bhoj Raj Sharma to study the process of registering it as a reinsurance company.

“We plan to register the pool as a reinsurance company within the current fiscal year based on the report of the committee and start operations from the next fiscal year,” said Ramesh Lamsal, chief executive officer of the pool.

With massive amounts of money going outside the country as payment for reinsurance premiums, establishment of a domestic reinsurance company is expected to stem the flow.

The pool provides reinsurance coverage for damage caused by terrorism. It was created in 2003 during the conflict as foreign reinsurance companies refused to provide such reinsurance coverage.

A year ago, a task force formed by the government suggested turning the pool into a company to provide reinsurance in a bid to check the massive outflow of money in premiums which amounts to more than Rs 2.4 billion annually. The task force headed by Bishnu Lamsal, then joint secretary at the Finance Ministry, suggested that the pool could be used as a share investment to establish the company.

The pool currently holds funds worth more than Rs 1.5 billion in which 17 non-life insurance companies and the government have an almost equal stake. Initially, the pool with a capital of Rs 110 million was created with a 50-50 investment by non-life insurance companies and the government.

The pool has also initiated discussions about increasing the paid-up capital in a bid to become financially stronger. “It is necessary to have at least Rs 5 billion to start a reinsurance company,” said Lamsal. “But we can start with Rs 2 billion.” He added that the committee led by Sharma would recommend the required size of the paid-up capital.

Earlier, the task force had recommended that the proposed company have a paid-up capital of Rs 2 billion and an authorized capital of Rs 5 billion. The task force had also advised the government to allow foreign investors, particularly international insurance companies and brokers, to hold a 25 percent stake.

Source: The Kathmandu Post

IB mulls zero depreciation motor insurance product

KATHMANDU, April 28, 2012

The Insurance Board is mulling over directing insurance companies to introduce motor insurance policies with zero depreciation coverage.

If such a product is launched people who have insured vehicles can claim back every penny that has gone into repair work following an accident, meaning insurance companies cannot deduct any amount in the name of depreciation.

Currently, insurance companies are allowed to deduct certain amount from the total claim amount depending on types of parts replaced during repair work.

For instance, an amount of up to 50 percent can be deducted in case parts are made of rubber, plastic and nylon. Similarly, spare parts made of fiber glass are subject to 30 percent deduction. On other parts, other than those made of glass, deduction of anywhere from five percent to 50 percent can be made depending on the age of the part.

It is the same on repair work. For instance, insurance companies can deduct five percent of the amount incurred in repair if the vehicle is less than six months old. This amount can go up to 50 percent if the vehicle is over four years old. This means if the total repair cost amounts to Rs 100,000, insurance companies are entitled to deduct up to Rs 50,000 as depreciation.

“Because of these provisions, a person who has damaged a vehicle in an accident cannot get back full coverage amount despite paying premium amounts on time,” Binod Aryal, executive director of the Insurance Board, told Republica. “To end this predicament, we are planning to instruct insurers to introduce zero depreciation motor insurance product which offers full claim coverage on the value of parts replaced.”

If the product is launched, customers can also claim back money spent on items like engine oil, Aryal said. “This is to ensure people do not have to spend any extra money upon purchase of this particular motor insurance product,” he added.

This privilege, however, will not come cheap as people will also have to be ready to pay higher premium amount if they decide to purchase the product.

“It will definitely be expensive than the regular motor insurance product available in the market but we will try to fix the price in a way it does not create a hole in clients´ pockets,” Aryal said.

However, various insurance companies told Republica that Nepali market may not respond well to such a product as premium rates are likely to be very high.

Source: Republica