NIA officials say they are working on the action that will be taken against insurance companies failing to meet the capital requirement. A senior official of NIA said that insurance companies could be barred from doing business with any 'insurance product' (insurance plan).
As per the deadline, insurance companies have to meet the prescribed paid-up capital by mid-April. "Given the progress we have seen so far, it seems most of the companies will not meet the paid-up capital requirement within the deadline," said the NIA official. "The authority will extend the deadline. But at the same time, we will also exert pressure on the insurers to meet the capital requirement by barring them from selling one of the insurance products." Among the insurance companies, Nepal Life Insurance, National Life Insurance, Neco Insurance, and Shikhar Insurance have already met the capital requirement set by the NIA. With NIA pushing for capital increment, insurance companies have adopted two approaches to increase their paid-up capital. The majority of insurance companies have opted for mergers while some are into right share issuance to raise capital. A series of merger agreements have been signed in the last 12 months. Of the 19 insurance companies involved in the merger process, six companies have merged to become three and have started their integrated business while 13 others are still in the process of completing their merger process. There have been two successful mergers in the non-life insurance sector in the past year. In July 2022, Himalayan General Insurance and Everest Insurance merged to form Himalayan Everest Insurance Insurance Co. Ltd. Similarly, in October, Sanima General Insurance and General Insurance Company merged to form Sanima GIC Insurance Ltd. The first merger among the life insurance companies took place in the last week of December 2022 when two life insurance companies - Surya Life Insurance and Jyoti Life Insurance - completed their merger process and started integrated business as Suryajyoti Life Insurance Company. NIA said even if companies that have signed merger agreements, it would take months for them to start their integrated business. And, the paid-up capital of those companies who have planned to start the integrated business by mid-April will not reach as prescribed by the NIA. Such companies are planning to increase paid-up capital through the issuance of bonus shares which will take months. While some other companies are planning to increase the paid-up capital through rights share issuance, they are yet to start the process. The whole process will take months as they have to follow a series of procedures before the issuance of the right shares. As of now, four life insurance companies are planning to increase their paid-up capital by issuing the right shares. Citizen Life Insurance, Sun Nepal Life Insurance, IME Life Insurance, and Reliable Life Insurance have submitted plans to the NIA to increase their capital through right share issuance. However, there is still confusion about increasing the paid-up capital of government-owned insurance companies. The paid-up capital of the Rastriya Beema Sansthan and Rastriya Beema Company is much less than the prescribed limit. Both companies have not forwarded their capital increment plant to NIA.
