As bank interest rates continue to decline, insurance companies in Nepal have significantly increased their investments in the stock market, channeling over Rs 37bn into listed shares to diversify portfolios and maximize returns. This reflects a broader trend of seeking higher yields in a low-interest-rate environment, with insurers capitalizing on the Nepal Stock Exchange (Nepse) to bolster profitability.
According to the Nepal Insurance Authority (NIA), 24 listed insurance companies have invested
Rs 37.61bn in shares listed on the Nepse as of mid-April 2025, a sharp rise from Rs 16.51bn in mid-April 2024. The surge in investment is driven by the need to offset diminishing returns from traditional fixed-income instruments, such as bank deposits, which have become less lucrative due to declining interest rates.
Institutional investors, particularly insurance companies, play a pivotal role in stabilizing the stock market. Unlike individual investors, who often engage in short-term, speculative trading, institutions adopt a long-term investment approach. This strategy reduces panic-driven sell-offs, cushions market volatility and enhances liquidity. The steady capital inflows from insurers foster market resilience and boost confidence among individual investors. Insurance companies, as some of the largest institutional investors in Nepal’s capital market, are instrumental in driving this stability.
NIA regulations permit insurance companies to allocate up to 10 percent of their investable funds to shares of listed companies. Life insurance companies have been particularly aggressive, increasing their investments in ordinary shares by an impressive 108 percent over the past year. By mid-April 2025, life insurers had invested Rs 33.07bn in the secondary market, compared to Rs 4.54bn invested by non-life insurance companies.
Experts attribute this shift to the sharp decline in interest rates, which has eroded returns on low-yielding bank deposits. With traditional investment avenues offering diminished profitability, insurers are increasingly turning to the stock market to maintain financial viability. This trend not only reflects adaptive financial strategies but also signals growing confidence in Nepal’s equity market.
