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MARKET REPORT - NEPAL
Small market, big potential
Despite being a small market and the challenges faced, Prof Dr Fatta Bahadur
KC, Chairman of Nepal’s Insurance Board (Beema Samiti), says there is big
potential in the country as the regulator works actively to grow the market.
The gross premiums written by the industry grew roots level. The income
from NPR21.96 billion (US$209.33 million) in 2013 levels of Nepalese people
to NPR28.24 billion in 2014, at an average annual have increased in recent
growth rate of 30%.The sector grew by an average annual years through foreign
rate of 29.20 %, while the non-life sector grew with 27% employment and other
during the period. economic activities. New
and innovative products are
Total claims were NPR5.59 billion in 2013 and reached being offered by insurance
NPR 9.82 billion in 2014. The increment rate was 75.67%. companies to increase the
The majority of the claims was due to maturity claima of life insurance penetration.
insurance. Similarly, total reinsurance premiums was NPR4.40 Regulatory measures
billion in 2013, which increased to NPR5.68 billion in 2014, are strong and getting
a growth of 29% y-o-y. The sector earned total net profit of increasingly stronger
NPR2.10 billion in 2013 and that reached to NPR3.03 billion in which enhances the public
2014. The increment rate of profitability was 44.28%. The GDP faith in insurance.
contribution of insurance is 1.44% in 2013 and 1.46% in 2014.
Equipped with a
There is strong potential for growth in several areas in the contemporary legal
insurance market. It is feasible to considerably increase the provision, Samiti started
density rate in the local market. Though growing moderately, supervisory actions to
efforts of improving the per capita share of premiums are address the barriers facing
more than on track. There has been an awareness campaign to the insurance industry,
increase the volume of premium vertically and linearly. They which has given a better
have reached out to almost all of the economic and social result in the last decade. In
activities. the last five years, Samiti
Key drivers of growth has controlled an insurance company and handed it back to
Increasing the premium income will certainly open doors for its Board of Directors after upgrading its financial health.
quantitative as well as qualitative build-ups of the investment Samiti’s regulatory guidelines are internationally compatible
portfolios in the market, particularly when long-term insurance and consistent with the IAIS Core Principles. Samiti is the first
becomes the dominating factor in the investment portfolio. insurance supervisory authority in the region and a founding
Ultimately, that stimulates the growth of the market. member of IAIS as well.
In so doing, Samiti is a pioneer in the region in its efforts
Insurers have increased their network of branches and sub- to regulate and develop the insurance regulatory frameworks
branches which increases the access of insurance at the grass despite the political volatility.
At the institutional level, Samiti’s strategies and action plans
are designed to regulate and develop insurers’ legal, financial
and technical frameworks so they can operate in a healthy and
professional environment based on international standards.
Key challenges in managing the market’s risks
The established lines of business are more competitive;
hence, their margins are minimal. With economic and social
developments, the market is adopting creative attitudes to
design new products to satisfy the public needs, although the
pace is still slow. A variety of new products including cash
insurance, bankers’ indemnity, and professional liability have
undergone comprehensive change recently.
One of the main obstructions which limited the introduction
of new products locally was the cost of reinsurance protection
needed and the number of policies sold. The limited access
to security and increased natural calamities have resulted in
insurers seemingly frightened to enter the new property and
liability insurance market. Samiti is encouraging insurers to
introduce new products, especially those where the social and/
or economic interests need protection.
One of the main barriers facing the insurance industry in the
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