Page 41 - Digital Edition SIRC Supplement

MARKET REPORT - NEPAL
country is the weak insurance awareness. Samiti’s strategy for
regulating and developing the market will subsequently involve
institutional as well as operational changes.
Despite actively trying to optimise the industry through
regulations, we have a weak legal framework and face the
problem of insufficient autonomy. The capacity of regulation is
also tight in laws. However, Nepal is in the process of replacing companies have been intensified. The insurance companies
the existing Insurance Act with a new one. So, hopefully these
problems will be solved after the enactment of the proposed act.
Insurers are facing an acute shortage of competent human
resources. This is emerging as a big issue in this sector.
Political instability is another big challenge leading to policy
uncertainties. The new Constitution promulgation process
has almost come to end, hopefully, that will end the political
volatility and instability in this country.
As it is an established fact that policyholders and
beneficiaries’ interests are best served when the insurers settle near future, Samiti is planning to set the capital requirement
the claims promptly and according to the best professional
practices, Samiti has worked out a policy by which the
claimants will have many alternatives to settle their claims in
addition to litigation. Such alternatives include conciliation,
mediation and binding arbitration.
Realising the importance of the different roles played by
the insurance services providers to any market, Samiti has
considered as a matter of policy, to regulate these professions
according to the international practices and codes of conduct,
and enhance their performance and quality of services.
Role of reinsurance in the market
The strength and dependency of reinsurance market is vitally
important in Nepal, which is the largest portion of underwriting. quality of the insurance industry and its share of participation
Due to limited retention capacity of insurers, they heavily
depend on reinsurance. Nepalese insurance companies have
very low capital bases, low levels of reserves and being a tiny
insurance market which is just being developed, they are not
able to retain much of the underwritten business. In addition,
they seek for higher security for natural calamities, primarily
earthquake which is common in this zone. These reasons
force them to give more business to reinsurance companies.
Despite the availability of a global reinsurance market, the
preference has been the regional reinsurance companies due
to the lower costs.
Domestically, Nepal Reinsurance Company Ltd has just
been incepted, but it is yet to begin operation. So, some part
of reinsurance will be underwritten by this local company in
the near future.
Future of the market
The new Act is proposed to give full
autonomy to Samiti for the prudent regulation
to the sector.
Mega infrastructure projects such as
hydropower, tunnel roads, fast-track roads,
and international airports, are in the pipeline.
These projects will boost the insurance market
in this country. Furthermore, reconstruction
of demolished physical property in the last
earthquake are in the process, which also
helps to boost the entire sector.
Alternative distribution channels,
including bancassurance, is near
formalisation. Samiti is keen to introduce
microinsurance within the formal system.
A new solvency margin requirement
has been developed, with a more advanced
reserving system introduced. This is followed
Back to Contents SIRC Supplement • November 2015 • www.asiainsurancereview.com 39
by clear-cut guidelines for insurers to cede their business to
reinsurers which are expected to be highly recognised and
internationally rated.
Likewise, the supervision and control tools have been
similarly developed and elevated to cope with the changes
already introduced. Technical and financial supervision of the
are now required to furnish Samiti with timely and detailed
quarterly financial reports and statements. In addition, field
supervision has been going on, enabling Samiti to move in
early if needed.In the programme of enhancing the insurers,
Samiti has proposed to increase the paid up capital of both life
and non-life insurance companies.
At the sectoral level, Samiti has initiated the regulation and
supervision of the insurance support services, and sets of rules
have been introduced to govern the licensing and operations of
insurance agents, brokers and third-party administrators. In the
of Brokers and Third-Party Administrators.
The Samiti strongly believes that the interests of all the
stakeholders involved in the insurance operations including
the policyholders will be best served by solving their disputes
according to the terms and conditions of the contract, with the
least cost and time. Therefore, different natures of disputes
are being settled. Arbitration and mediation means are also
being used as per semi-jurisdiction status mentioned in the
Insurance Act, 2049.
On the national level, the institutional and sectoral regulation
and development process will improve the performance and
in the national economy, hence paving the way for the insurance
institutions and sector to grow technically and financially, with
a pace and rate comparable with international levels.
Big potential
In conclusion, Nepal has a big potential in insurance although
there are many barriers. There remain many challenges like
poverty, lack of access to insurance, and limited knowledge
of insurance. Political instability is also hindering the entire
insurance industry, but the insurance regulator is actively
trying to create a prudent market. Beema Samiti, while still
not a full autonomous body, is the first regulator in the South
Asian region, and it is confident that the many activities and
improvement programmes in the pipeline will increase the
faith of public in insurance. So, the future of insurance in
Nepal is bright.