Nepal Insurance Authority (NIA) plans to tighten the procedure for purchase and construction of real estate for office purposes by insurance companies. The Authority recently released the draft regulation 'Insurance Company's Fixed Asset Purchase Directive, 2081 BS for public feedback and suggestions.
According to the current system when companies purchase and construct real estate for office and business purposes (investment), they only need prior approval from the NIA and approval is granted by following a basic procedure.
According to media reports the NIA found that in the current scheme of things the directors and managers of some insurance companies have been involved in significant manipulation regarding the purchase and construction of land for office purposes.
Sources say there has been a tendency for managers and directors to buy low-priced land at inflated prices for personal gain. The NIA has also received information about the purchase of more land than needed for office purposes.
The proposed new regulation, however, lays down that companies will now need to obtain approval from the Authority in two stages. First, the company will be required to apply to the Authority specifying the intended purpose (office, business, or both). In the case of business purposes, approval will be granted according to the "Investment Directive for Insurance Companies."
To stem the irregularities in the present system of approval, the NIA has proposed the new regulation. As the present system of approval is more cursory in nature, it left the field wide open for manipulation and the companies took cover under the authority’s approval.
The NIA hopes that by creating stricter guidelines to bring in accountability, the company's board and senior executives can be held responsible for any mala fide actions. Hence, the process has been made more elaborate.