After pushing insurance companies to consolidation, the Nepal Insurance Authority (NIA), the regulator of the insurance sector, has initiated a study, for the first time, to find out the 'required number of insurance companies in the country'. NIA, which is conducting the study with the technical support of Tribhuvan University. NIA forced insurance companies to go either for mergers or acquisitions by raising the minimum paid-up capital requirements for both life and non-life insurers. The regulator has increased the paid-up capital of non-life insurance companies to Rs 2bn while it is Rs 5bn for life insurance companies. The consolidation in the insurance sector has brought down the number of insurance companies over the last one year; the number of non-life insurance companies has declined to 15 from earlier 20, while the number of life insurance companies came down to 14 from 19.

While the numbers have decreased, NIA wants to ascertain the required number of insurers in Nepal. The NIA Executive Director Raju Raman Paudel said that a study has been initiated to find how many companies are needed in the country. "The recent merger drive has reduced the number. However, there has been no study to exact the required number of insurance companies for the Nepali market," said Paudel, "We have started its study with the technical support of the Central Department of Economics of Tribhuvan University. NIA will adopt a policy based on the findings of the study."

Given the size of the market and geography, experts say the number of insurance companies in Nepal is still more. Despite a surge in insurance companies' numbers, insurance services have not yet been expanded to rural areas of the country as insurance companies are mainly concentrated in cities and urban areas. The merger momentum in the Nepali insurance sector intensified after NIA increased the minimum paid-up capital requirements for insurers of both categories. The authority has been pushing for consolidation in the Nepali insurance sector since the new Chairman Surya Silwal took charge of NIA nearly two years ago. Though there have been successful mergers, most companies are yet to increase their paid-up capital to meet the regulatory requirement. After NIA issued the directive on paid-up capital increment, only four insurance companies raised their capital as per the regulatory requirement. Among the life insurance companies, the paid-up capital of Nepal Life Insurance Company is above Rs 5bn. Three non-life insurance companies - Shikhar Insurance, Siddhartha Premier Insurance, and Sagarmatha Lumbini Insurance have also met the regulatory obligation. As the paid-up capital of the majority of insurance companies is below the regulatory requirement, NIA extended the deadline to mid-July, 2023.