Three non-life firms get LoI
Kathmandu, October 6
The Insurance Board (IB) — the insurance sector regulator of the country — has initiated the process to grant operating licence to three non-life insurance companies. The IB has called upon three out of the four firms that had submitted their applications for licence since long for the licensing process.
IB has sent the letter of intent (LoI) to Sanima Insurance Company, Ajod Insurance Company and General Insurance Company to begin the licensing process, for which the three-month countdown began on August 24. Meanwhile, Manakamana Insurance Company has not been sent the LoI because it had not submitted proper documents while applying for the licence.
The companies that have received the LoI need to show the required paid-up capital to IB before they are granted the operating licence. According to a provision of a directive related to registration and operation of insurance companies, non-life firms should have Rs one billion paid-up capital to get operating licence.
“The new companies should show Rs 700 million out of Rs one billion because the 30 per cent share should be given to general public through issuance of initial public offering,” Raju Raman Paudel, director at IB, said.
IB will only issue the operating licence to those companies that can show the paid-up capital within the set deadline. Moreover, they will have to start formal operation within three months of getting their operating licence.
As per the provision of Insurance Act 1992, the IB can provide operating licence to non-life companies. However, it can only recommend the names of the eligible firms to the government for providing licence to life insurance companies.
Earlier, on the recommendation of IB, the government had provided operation licence to 10 life insurance companies. Out of them, IME Life Insurance, Sun Nepal, Union Life and Jyoti Life Insurance Company have already started their formal operation.
Currently, 17 non-life firms are in operation. If all the three companies that have received the LoI come into operation, there will be 20 players in the market within six months.
The IB has already directed the insurance companies, which are in operation, to increase their paid-up capital within the end of the current fiscal year. As per the direction of the regulator, all the insurance firms have submitted their capital increment plan to IB.
Also, the authority had barred non-life firms from distributing cash dividend on May 19, 2015, just after the devastating earthquakes of April and May that year. Consequently, all the non-life insurance firms have planned to increase paid-up capital through bonus shares and rights share issuance.