NIA said the government has an outstanding amount of Rs 2.94bn to be paid as subsidies. If the government does not fulfill this payment, the association has decided to halt the sale of agricultural insurance policies and the payment of claims starting from May 21.
According to NIA, there is a pending amount for fish insurance subsidies from 2020/2021. Similarly, for crop insurance, a partial payment has been made from June/July to March/April 2021/2022, and the remaining subsidy amount has not been disbursed. NIA also states there is a pending amount for livestock insurance subsidy from June/July of 2021 onwards. According to the association, they have repeatedly written to the Ministry of Agriculture and Livestock Development, Department of Agriculture, and Nepal Insurance Authority for the release of the subsidy, but it has not been received. The withholding of billions of rupees has increased financial risks for the companies involved, the association stated. Sunil Ballav Pant, CEO of NLG Insurance said the decision to suspend the agricultural insurance business is based on the current situation. “Rs 3bn is a huge amount in pending. We have come to a situation where we cannot pay the claims of those who have purchased agri insurance policies,” he said. “If the government does not provide the funds after the claims are made, it will create difficulties for us. The claims must be paid. The amount we have received so far is also limited. However, now we do not have sufficient funds to fulfill this responsibility. So, we decided to halt selling the insurance policies and claims payments for the time being.” According to Raju Raman Paudel, Executive Director of Nepal Insurance Authority, this is a compelling situation. “Though it is challenging, as the regulatory body, we are making efforts to resolve this issue as soon as possible.” “The government cannot always provide subsidies. It is necessary to study the impact of such subsidies as well,” he said. “This is a subject of debate.” Although insurance companies say they have not received subsidies, Finance Ministry officials say the ministry has been releasing the subsidy amount. “Since the demand is higher than the allocated budget, there are problems with the payments. As the government is currently facing a shortage of resources, we have not been able to disburse the amount,” said a finance ministry official. In a bid to cover the damages and losses to agriculture, the government introduced the Agriculture and Livestock Insurance Program in the fiscal year 2013/2014. In the initial phase, the government provided a 50 percent subsidy on the premium of the insurance. The premium was later increased to 75 percent, and currently, it is 80 percent. Now, the farmers have to pay Rs 20 out of Rs 100 premium while insuring crops and livestock. The insurance companies will get the rest Rs 80 from the government. The statistics of the Nepal Insurance Authority (NIA) show the business of agriculture insurance has increased by 417.55 percent in the first half of FY 2022/23. Insurance companies have collected Rs 1.09bn in insurance premiums from agriculture insurance in the first six months of the current fiscal compared to Rs 211.13m during the same period of the last fiscal. The non-life insurance companies have sold 82,746 agricultural insurance policies in the current fiscal year.
