Kathmandu, April 4:

Rastriya Beema Sansthan (RBS), the fully state-owned public enterprise, is to start re-insurance scheme, for the first time in Nepal.

With the launch of re-insurance, Nepali insurance business will have access to global insurance market by which insurance companies would be able to protect themselves against the risk of losses with other insurance companies.

With the liberalisation of Nepali economy in the late 80s and the entry of private sector, Nepal witnessed a boom in insurance business. As a result, the number of insurance companies rose to 22, including five in life and 17 in general insurance over the last one and half decade.

However, a reinsurance company or scheme has yet not been realised in Nepal, as it requires relatively large capital, professional expertise and human resource. The increasing risk of portfolio management in industrial sector as well as a booming insurance business are said to be some of the factors leading to the start of reinsurance business in Nepal.

The main use of reinsurance is to allow the ceding company to assume individual risks greater than its size would otherwise allow, and to protect the ceding against catastrophic losses. Reinsurance allows an insurance company to offer larger limits of protection to a policyholder than its own capital would otherwise allow.

Due to lack of reinsurance in Nepal, all Nepali insurance companies are being reinsured by foreign reinsurance companies.

According to officials at RBS, it has already framed a plan to invest up to three billion rupees for insurance. It has already started negotiations with foreign reinsurance companies for technical and human resource development. It also plans to reinsure domestic as well as foreign insurance.

If everything goes as per plan, we will start reinsurance within two years, said Bhoj Raj Sharma, chairman of RBS. He also disclosed that RBS is negotiating with an Indian reinsurance company GIC for partnership to run reinsurance business in Nepal.

“Some other foreign companies have also shown interest in joint venture partnership.

We are looking for investment as well as partnership for technical collaboration and human resource development,” Sharma said.

According to him, RBS initially plans to start reinsurance for general (non-life) coverage, as life insurance is generally for longer period.