Convert insurance pool into a reinsurer: Panel

Convert insurance pool into a reinsurer: Panel


REPUBLICA
KATHMANDU, Feb 28: A taskforce led by a senior official at the Ministry of Finance (MoF) has advocated strongly for the establishment of a reinsurance company in the country to check massive outflow of reinsurance premium, which stands well over Rs 2.40 billion a year.

“A local reinsurance company -- that covers risk of insurance companies against reinsurance premium -- can help rationalize the cost of risk coverage, making insurance cost cheaper,” said Bishnu Prasad Lamsal, leader of the taskforce and joint secretary at MoF.


It is also expected to help implementation of targeted insurance schemes like crop and other micro-insurances, third party insurance, among others.

The taskforce, which submitted its report to Deputy Prime Minister and Finance Minister Bharat Mohan Adhikari on Monday, also suggested the government to convert the existing Emergency Insurance Pool into a reinsurance company.

The emergency insurance pool, which was set up to cover risks related to riot and malicious damages some seven years ago, has generated a fund of Rs 960 million. The taskforce has suggested that the fund could be used as share investment for establishing the reinsurer.

“Private sector companies are willing to invest and Citizens Investment Trust and Employees´ Provident Fund too are eager to put their money in the company,” said Lamsal, suggesting the government to fix paid-up capital of the proposed reinsurance company at Rs 2 billion. It has recommended the government to fix authorized capital of the company at Rs 5 billion and advised the government to allow foreign investors, particularly the international insurance companies and brokers, to hold 25 percent stake

“This is critical, as only strategic partner with international experience can render the local reinsurance company competitive and enable them to tap business in South Asia and other countries across the globe,” says the report.

Given the present volume of insurance business at home and mechanism present so far, the report argues that the government can effectively set up the reinsurance company in six months. “With expertise we have, the company can become regional reinsurance player in two years,” says the report.

With capital upgrading and strategic involvement of international player, the report argues the company can become an active international reinsurer, taking global risk cover, in five years.

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