Insurance Board’s directive

KATHMANDU: Insurance Board (Beema Samiti) — the regulatory authority of insurance companies — has directed insurance companies to end cross holding.

“IB has today written

to insurance companies directing them to avoid cross-holding, spokesperson Shekhar Kumar Aryal said.

The board took the decision after some life insurance companies are found buying shares of other life insurance companies, he said adding that the board has clearly directed life insurance companies that they can’t buy shares of other life insurance companies.

“The rule is applicable for non-life insurance companies too,” he added.

Likewise, the board has also asked for details of share purchase and sale of insurance companies to other insurance companies under section 8 of Insurance Act 1992.

Insurance Core Principle (ICP) of International Association of Insurance Supervisors (IAIS) also has directed regulating bodies to control cross-holding.

Surya Life Insurance Company Ltd has purchased 100 units of shares of Nepal Life Insurance Company Ltd from the secondary market, according to the board. “It shows that the promoters don’t have faith on their own company,” he said adding that if the trend continues, it can gradually hurt the interest of general investor.

Earlier, in September the board has directed NB Insurance Company Ltd (NBIL) to sell the shares of subsidiary companies. NBIL — promoted by NB Group — has bought 2,38,000-unit shares of Nepal Bangladesh Bank, Nepal Credit & Commerce Bank, Shangri-La Housing and National Hydropower.

The Insurance Act 1992 forbids companies to invest in those firms which are promoted by

relatives of the companies’ management. Including life and non-life there are 26 insurance companies in Nepal at present. Nine companies are in the life insurance business and 16 are in non-life business

but the state owned Rastriya Beema Sansthan is doing both life and non-life business. Though it has been directed to separate the life and non-life business by the board.

According to IB, around 1.84 million Nepalis have done insurance. By this September, the total premium collection from insurance companies has come to Rs 32.75 billion. Similarly, non-life insurance policies has touched 2,90,000 by September.