KATHMANDU: Insurance Board (Bima Samiti) — the regulatory authorityy of the insurance companies — has directed NB Insurance Company Ltd (NBIL) to sell shares of subsidiary companies. “We have directed NB to sell the shares soon as possible,” said board chairman Dr Phatte Bahadur KC.

NBIL, promoted by NB Group, has 2,38,000 unit shares of Nepal Bangladesh Bank Ltd, Nepal Credit & Commerce Bank, Shangri-La Housing and National Hydropower. The Insurance Act 1993 forbids companies to invest in those firms which are promoted by relatives of the companies’ mangement. NB Group has direct investment in the above-named companies including nine others.

NBIL has been violating IB’s directions for a long time. “We have issued the last ultimatum to them,” KC said adding if they do not obey the rules the board will take tough action.

IB has also given an ultimatum to Alliance Insurance Company Ltd to build up paid-up capital as per direction till October 17. The board has set Rs 250 million for life insurance and Rs 100 million for non-life insurance companies.

IB has directed NBIL to maintain transparency in accounts. “IB found lots of irregularities in NBIL but the new management is gradually taking the right path,” said KC. Within two months the new management has made a provision of retirement fund and applied transparent accounting system, he explained. It has also withdrawn company vehicles from relatives of directors.

The board is working to bring new laws for effective regulation of insurance companies. IB is planning to increase the capital base of insurance companies from Rs 250 million to Rs 1 billion for life insurance and from Rs 100 million to Rs 500 million of non-life insurance companies. “Without broadening the capital base, we cannot expand the service,” said IB director Ramesh Raj Bhattrai.

Budget 2009-10 made two announcements — bringing new laws and insuring the deposits of small depositors — through strengthening the insurance business in Nepal. “If we want to insure small depositors, the insurance system should be revamped,” said Bhattrai.

The Nepali insurance industry has grown — 35 per cent in life and 30 per cent in non-life — over the last 14 months. The number of policy holders has reached 1.84 million and total premium collection is Rs 32.75 billion. Non-life insurance policies reached 2,90,000 till September 16, 2009.