KATHMANDU, June 5: Insurance Board (IB), the insurance regulatory authority of the country, has pushed for opening new insurance businesses like pension schemes and micro-insurance, aiming to cater to the socio-financial security needs of urban professionals as well as rural populace.
The Board has formally incorporated these major shifts in its policy in the new Insurance Act, which it recently forwarded to Ministry of Finance (MoF) for necessary actions for enactment.
Once enacted, the life insurance companies will be able to start pension schemes, something which the service sector professionals and private sector employees vulnerable to post-retirement financial security have been seeking direly. Under the scheme, they will be able to buy the scheme for different periods, after the maturity of which they will receive the return as pension.
Likewise, general insurance companies too will be able to start micro-insurance business targeting agricultural and livestock security and smaller financial security of rural populace as well as urban low-income groups.
So far, IB was not very enthusiastic about opening micro-insurance and pension insurance schemes.
The draft Act has also paves way for the establishment of Reinsurance Company in the country. Reinsurers are companies that cover risks of insurers, charging reinsurance premium from them, just as insurers charge insurance premium from the clients for covering their individual risks.
Currently, Nepali insurers are largely buying the reinsurance cover from Indian and British reinsurers.
The new Act has incorporated numerous prudential norms and tightened corporate governance norms for the companies.
Under these, companies will be asked to undertake actuarial valuation of their financial health and liability every year and announce bonus returns to the clients annually. Presently, the companies are doing so in every three years.
As goes with the insurance business, companies will need to maintain separate insurance fund for separate insurance business and maintain standing reserve fund to guarantee instant settlement of insurance liabilities as and when they arise. Companies can also maintain general reserve fund for security, but that is optional.
The draft Act seeks companies to maintain solvency margin, whereby their ratio of their total assets to liabilities must never fall below 1.25. “Insurers must not issue loans, guarantee and insurance security to the promoters, their family members and firms in which they hold the position of managing agent or have shares,” says the new draft.
The draft categorically asks companies to transfer at least 90 percent of their income as bonus returns to their clients. It has also incorporated provision on merger, acquisition and liquidation.
To fulfill the new regulatory challenges, the Act has proposed establishment of Nepal Insurance Authority (NIA) and transfer all assets and liabilities of IB to it. It has also proposed more teeth to the proposed NIA in order to enhance its regulatory capacity and render the insurance business more credible, competitive and fair.
It has proposed allowing the NIA to open regional offices, branches and sub-branches based on the need. The act has envisaged formation of a five-member policy recommendation body and seven-member investigation committee to dig out fraudulent activities carried out in the name of insurance.
Source: http://www.myrepublica.com/portal/index.php?action=news_details&news_id=19540
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