Nepal Insurance Authority (NIA) has put a curb on the investment of reinsurance companies.
Issuing a directive, the insurance sector’s regulator, NIA has defined 11 areas and related conditions for the reinsurers the investment of their capital. As per the new rule, reinsurers can spend up to 20 percent of their investment on the bonds to be issued by the sub-national governments and Nepal Rastra Bank.
There are two reinsurers—Nepal Reinsurance Company and Himalayan Reinsurance Company—operating in the country. Nepal Reinsurance Company has a paid-up capital of Rs 11.65 billion, while the privately-owned Himalayan Reinsurance Company has a paid-up capital of Rs 10 billion.
These reinsurers can invest only up to 30 percent in fixed deposits of ‘A’ class financial institutions and Nepal Infrastructure Development Bank. The limits are 20 percent and five percent, respectively, in the case of fixed deposits in ‘B’ and ‘C’ class financial institutions.
Likewise, the NIA has set ceilings of 20 percent for the reinsurers to invest in promoter shares, bonds and debentures of banks and financial institutions and companies listed with the Nepal Stock Exchange. The limits to invest in primary shares and schemes of mutual funds are 10 percent and five percent, respectively. Similarly, these companies are given a threshold of 10 percent to invest in realty business, agriculture, cold storage, tourism, manufacturing, hydropower, solar energy, transmission lines, road, education and health, among others.
