KATHMANDU, JUNE 27
Following the direction of the Insurance Board (IB) for insurers to increase their paid-up capital, there has been a growing trend of insurance companies coming together to sign a merger deal in the country, showing signs of growing consolidation in the sector.
In April, the IB decided to raise the paid-up capital threshold of insurance companies. When the new provision comes into effect, life insurers will have to increase their paid-up capital to five billion rupees from the existing two billion rupees. The decision was made because of the expanding insurance business across the country.
According to Information Officer Nirmal Adhikari, the Insurance Board called on insurance companies to increase their paidup capital about three months ago.
The Insurance Board has called on concerned stakeholders to increase the paid-up capital of nonlife insurance companies to Rs 2.5 billion while the paid-up capital of life insurance to five billion rupees.
"Following the decision made by the Insurance board, the insurance companies have integrated various methods, including going for a merger, to reach that criteria," he said.
So far, the Himalayan General Insurance (HGI) and Everest Insurance Company Limited from the non-life sector while Gurans LIfe, Union Life including Prime Life insurance have seen approval from the Insurance board for a merger and have already signed a memorandum of understanding (MoU) for that.
The IB has approved their request to merge but a final decision is yet to be made, Adhikari said.
The Insurance Board has also called on insurance companies to inform it of their decision to merge with other companies by mid-July. "Many other insurance companies have also shown interest in going for a merger with each other," he said.
"The trends of insurance companies going for a merger is increasing as it is also a good means of increasing their paid-up capital which is also the focus of the Insurance Board," Adhikari said. "Although we haven't forced any companies to go for merger, many companies have chosen the merger as means to increase their paidup capital as it decreases the administrative cost and strengthens the company. With the start of companies merging into one, it will also ease the regulating part for the board," he added.
Today, the Jyoti Life Insurance and the Surya Life insurance also signed an MoU for a merger.
A version of this article appears in the print on June 28, 2022, of The Himalayan Times.
