Nepal Insurance Authority (NIA) has revised the investment guidelines for insurance companies, allowing them to purchase up to 15 percent shares of a public company. Previously, insurance companies could buy up to 5 percent of the shares of a public company.
NIA has made such a provision by revising the investment guidelines of reinsurance, non-life and life insurance companies and micro-insurance companies at the same time.
Previously, insurance companies were allowed to invest only in ordinary shares, but through the new amendment, they will now be allowed to invest in ordinary and institutional shares.
All insurance companies were allowed to invest up to 10 percent of the total investment in ordinary shares of public limited companies listed in NEPSE.
Now, any reinsurance company, life insurance company, non-life insurance company and small insurance company can buy up to 15% of shares of any public limited company. The NIA has made an arrangement to allow them to invest up to 10 percent shares of public companies.
THimalayan Reinsurance Company made an agreement to purchase shares owned by Pakistan’s Habib Bank in Himalayan Bank and sent it to Nepal Rastra Bank (NRB) for approval.
Formerly, Habib Bank owned 20 percent shares in Himalayan Bank. After the merger with Civil Bank, the share ownership has come down to below 15 percent. Himalayan Reinsurance has made an agreement to purchase the shares and has also sent them to NIA and NRB for approval.
Earlier, insurance companies had been demanding to increase the investment limit and scope stating that there was a problem in investing in the promoter shares of agricultural and manufacturing companies. 15 percent shares are required to be represented as a director in a listed company.
The insurance companies demanded an amendment to this provision saying that they had to invest in such a way that they could be represented in the management of such companies.
Similarly, insurance companies can also invest 1.5 percent of their total investment in private equity funds and venture capital funds. According to the Specialized Investment Fund Rules 2019, insurance companies are allowed to invest in private equity funds and venture capital funds approved to do business by the Securities Board of Nepal (Sebon). According to the NIA, such investment by non-life insurance companies, life insurance companies and reinsurance companies should not exceed 1.5 percent of their total investment.
It is mentioned in the revised provisions of the investment guidelines issued by the NIA that a maximum of 1 percent can be invested in one fund. Approval of the NIA is a must while investing beyond the set limit including in the private equity funds and venture capital funds.
