Several Nepali insurance companies continue to fall short of meeting the mandatory capital requirements set by the Nepal Insurance Authority (NIA), even three years after the initial directive was issued. The NIA had set ambitious targets to strengthen the financial health of the insurance sector, requiring life insurance companies to raise their paid-up capital from Rs 2 billion to Rs 5 billion, and non-life insurers to increase theirs from Rs 1 billion to Rs 2.5 billion.
Back in April 2022, the regulatory body had instructed companies to submit capital increment or merger plans within 30 days, which saw responses from 34 insurers. The official deadline for fulfilling the capital increment was set for mid-April 2023. However, progress has been slower than expected, with many companies still unable to comply.
While a majority of life insurance companies have managed to meet the required capital threshold, Asian Life Insurance and Rastriya Jeevan Beema Company are notable exceptions. Asian Life is in the process of issuing right shares to bridge the gap between its current Rs 3.39 billion and the mandated Rs 5 billion. On the other hand, the government-owned Rastriya Jeevan Beema has made little progress, with a current capital base of just Rs 1.89 billion and no issuance of primary shares yet.
In the non-life insurance category, Nepal Insurance, United Ajod Insurance, Prabhu Insurance, Sanima General Insurance, and Rastriya Beema Company have failed to meet the capital criteria. These delays have raised concerns over their long-term financial resilience and ability to operate under the evolving regulatory framework.
The situation is similar among reinsurers, with Nepal Reinsurance and Himalayan Reinsurance both missing the mid-February 2025 deadline to increase their capital base to Rs 20 billion. A one-year extension has now been granted to help them meet the requirement.
In the micro-insurance segment, only three out of seven companies—Nepal Micro Insurance, Guardian Micro Life, and Crest Micro Life—have reached the Rs 750 million capital requirement. The remaining companies—Protective Micro Insurance, Liberty Micro Life, Star Micro, and Trust Micro Insurance—have submitted plans to raise capital through public share issuance.
Despite the sluggish progress, the NIA’s capital enhancement policy has led to significant consolidation in the industry. Since its introduction, 11 insurance companies have undergone mergers, reducing the number of non-life insurers from 20 to 14 and life insurers from 19 to 14. This trend reflects a strategic move toward a leaner but more financially robust insurance sector in Nepal.
As the new deadlines approach, it remains to be seen whether the lagging companies will be able to fulfill the regulatory mandates or face further action from the insurance authority.
