Now we are Making the Company Stronger and More Capable by Rating the Company : CEO Rayamazhi

An interview with the Chief Executive Officer of Nepal Reinsurance Company Limited Mr. Shankar Kumar Rayamajhi on behalf of the souvenir publication published by sub-committee on the occasion of the tenth annual anniversary day of the company.

First of all can you give a brief explanation about Nepal Reinsurance Company Limited?

Due to the fact that the foreign reinsurance companies were unwilling to accept the risk due to the increased risks related to terrorism within Nepal at that time, the Contingency Insurance Fund was established in 2060/6/30 B.S, 2003/10/17 A.D. with the joint Investment of the Government of Nepal and all non-life insurance companies with the aim of carrying these risks within Nepal.

The idea of ​​establishing a reinsurance company in Nepal by heartening the fact that lakhs of money goes out of Nepal for annual reinsurance (Annual Budget of the Government of Nepal: FY 2064/65), B.S. 2007/08 A.D. the Council of Ministers of Nepal mobilized the contingency insurance fund on 07/08/2014 A.D. to reinsurance in Nepal. The decision to establish the company was made.

In line with this, Nepal Reinsurance Company was established and operated by registering in the company registrar’s office on 21/07/21 and obtaining a business license from the insurance committee on 09/01/2014. All the rights, rights, assets, liabilities and employees of the casualty insurance fund have been transferred to the reinsurance company. 

The establishment and conception of this company is based on the concept of public, private and partnership. Currently, this company is doing business with insurance companies of different countries of the world including Nepal.As the first reinsurance company of Nepal, this company has been doing business for the past 8 years. What are the main problems of this company?

The fact that Indian insurance companies are dominant in the early stage of insurance in Nepal is well known to all of us. Comparing the development of the insurance sector and the banking sector, which is only about 10 years younger than the banking sector of the country, it is clear that there is a deep gap between these two sectors. The banking sector has a direct relationship with various dimensions of the economy, while the relationship between the insurance sector and other sectors of the economy is also very sensitive and important.

The banking sector helps to keep the economy running, while the insurance sector provides security to other sectors and ensures that business can be done safely. In this way, the insurance sector is a sensitive part of the economy. This sector is still not as modernized as banking.

Lack of necessary experts and skilled manpower for the company, lack of international level software, lack of international level rating of the company, inability to complete the construction of the building on time, lack of sufficient capital, The leadership of the board of directors keeps changing. The business of this company, which is protected and promoted by the government, has recently been curtailed by the regulatory body, Nepal Insurance Authority, the inability to publish financial statements on time due to failure to receive timely business data and insurance fees from insurance companies, etc. are present as major problems and challenges.

It was mentioned that this company’s business regulatory body, Nepal Insurance Authority, has been cut down as a major problem and challenge. What kind of impact is it having on the company’s business?

Every person has the right to protect and increase his property. The same applies to companies. This is what the principles of natural justice and the rule of law say. The investment of the Government of Nepal in our company is 44.04 percent.

Established and operated with government investment, the business of this company was previously protected and promoted by special arrangement by the government. It is clear that the numerous instructions of the Nepal Insurance Authority on the need to continue this work have led to a reduction in the business of the company and a negative impact on the business growth. According to our accounts, this action will have a significant impact on the company’s annual income. In addition, such directives of Nepal Insurance Authority and short-term changes in various policies are not giving a positive message to the overall international market.

If so, what is the company doing to protect and promote the business of Nepal government’s own company?

From November 2021, the business reduction of this company has been started in a well-planned manner. Since then, we have repeatedly sent letters and requests to the Nepal Insurance Authority and the Ministry of Finance of the Government of Nepal to protect the business. It has been very difficult for us to protect the business of government companies due to the actions of competing companies and even regulatory bodies.

Especially regarding terrorism risk group business, direct share business and life insurance renewal fee, the board of directors of the company had to decide to protect the business twice (2022.018.01 and 2023.07.26).

Among the issues decided by the Board of Directors 212 times, after correspondence from the Government of Nepal, the Ministry of Finance, the Nepal Insurance Authority has issued a circular to all non-life insurance companies to provide the bridge business of terrorism risk group to this company as it is.

On the one hand, according to the circular issued by the Nepal Insurance Authority, the insurance companies are not implementing it, on the other hand, based on the decision made by the Board of Directors, the Ministry of Finance of the Government of Nepal dated 07.14.2023 ) to Nepal Insurance Authority

“Necessary and appropriate decision regarding direct share and renewal fee of life insurance is not issued by Nepal Insurance Authority, which is the main subject of the correspondence, which is about taking necessary action and informing. The company has been financially troubled.However, many written and oral requests have been made on these issues. In order to protect and promote the business of the government’s own company, there is a strong tendency to not wash it with fire and water because of competing companies. However, the company family has been cautious in protecting the company’s business.

Are you confident that the government of Nepal will protect the business of its own company or not?

I am fully convinced. Doing this is the ultimate responsibility of the government itself. The government of Nepal will protect the business of this company, which was established and operated with its own investment, and will also protect and promote the sacred national interest. It started with the current Honorable Minister of Finance Dr. The lighting is from Due to the directives of the Nepal Insurance Authority, the company was forced to lose the business of the direct share and renewal fee of the life insurance. The company is optimistic that the direction of Dr.Prakasharan Mahat will be received by this company.

You became the chief executive officer of this company with long experience in the banking sector of Nepal. What is the difference between the banking sector and the insurance sector? Can you tell me about your experience?

After spending three decades in the banking sector and making this insurance sector my career path, if I talk about the differences I have found, even though Nepal’s banking sector is 10 years older than the insurance sector, it seems that the banking sector is much ahead in terms of maturity. The implementation of the financial sector reform program had a very positive impact on the banking sector. The insurance sector is behind the banking sector. For the advancement and progress of the insurance sector, the contribution of the entire sector including the government of Nepal, regulatory bodies will be important and it is inevitable to develop the sector qualitatively and quantitatively in the coming days.

Until recently, this company, which was a single organization in the Nepali reinsurance market, has a strategy to advance its operations when competitors have also arrived. Can you tell me briefly?

Both companies are doing reinsurance business. The only difference is that the government owns more shares in our company. The objective facts and practices have proven that the competitive company established with private sector investment was established to take away the profitable business of the government company.A competing company is challenging us in a very unprofessional manner. But we are proceeding in a commercial way. This company, which is invested by most of the insurance companies, has taken a strategy to become a strong, quality and effective reinsurance company in the Asian continent while advancing its business.

It is said that the reinsurance market is never national, it is always international. In this regard, how has Nepal Reinsurance Company made its presence in the international market? In this way, what challenges does this company have to face when doing business in the international reinsurance market and what kind of strategy should be adopted to do business in the international market in a refined manner in the future?

Of course, the cycle of insurance in reinsurance is very long. As reinsurance accepted by one company is retroceded to another reinsurance company, retrocession is not limited to one country or continent, it is spread globally. Nepal Reinsurance Company keeps the risk up to its own carrying capacity among the accepted risks and minimizes the risk through retrocession of the rest of the risk. Thus, the coordination between risk acceptance and risk management is the main challenge of the reinsurance company. In order to obtain cheap reinsurance business through the international market, certain technical conditions have to be met which we cannot do alone. As our company needs to be rated through an international rating agency, it is necessary to have a rating based on the country’s risk first, which we do not do. If this happens, there is a possibility that we will get cheap reinsurance from the international market. In addition to this, a strategy has been taken to increase the business by supplying strong, capable, technically skilled manpower, purchasing and implementing effective international level software, rating the company internationally.

On 15 June 2023, he concluded the 8th Sadharan Sabha. Paid up capital reached 12 billion 81 crore 35 lakh. Is this capital enough?

No, of course not. Capital should be arranged on the basis of risk measurement. Global warming and climate change are increasing the risk. Due to this, it seems that the company has to increase its holding capacity and reduce the retro distress in the context of having to spend a very large amount of money through the reinsurance business as the price increases for catastrophic risk in the international insurance market. For which the adequacy of capital is the determining factor, if the capital of this company is not sufficient to bear the liability in an emergency situation. Because of that, in my personal opinion, the capital of the company should be raised to at least 25 to 30 billion rupees. This is not possible only with the dividend given by the company on the basis of profit. The capital will have to be increased by issuing rights shares.

Although the company was established in the year 2014, there are no guidelines and procedures for the company. How challenging was the task of creating the necessary direction and procedures for the company?

It was very challenging. Of course, since the company was new, a lot of procedures and direction had yet to be developed. Due to the lack of it, my daily work will be adversely affected, after my appointment in the last financial year 2021/022, Non-life Life Claims Director – 2021, Director – 2021, Non-life Insurance Underwriting Director – 2021, Life Insurance Underwriting Director – 2021, Reinsurance Director – 2022 ,Procedure-2021,Marketing Directive-2022, Employee Welfare Fund Operating Procedures-2022, Employee Welfare Fund Operating Procedures-2022, Uncategorized Employee Upgradation Procedures-2022, have been made by the company to fulfill the workload of complying with the directives. There is also a need to revise the directives made for the company and make some directives.

Can you shed some light on the growth of the company’s reinsurance business during this tenure?
This company has been doing reinsurance business with insurance companies from different countries of the world including Nepal since its inception. Company’s past 3 years Reinsurance fee increase respectively 16 percent in 2019/77, 32 percent in 2019/78. In 2021/022, it has increased by about 20 percent, while this year In spite of the 50 percent reduction in the direct share business in 2022/23, there has been an increase of about 5 percent in the business. Also, the main source of business of reinsurance company is treaty business and this company has a. In 2019/020, out of the non-life insurance companies operating in Nepal, 6 insurance companies were involved in treaty business. 10 in 2020/021, 11 in 2021/022, With 18 companies in 2022/023 and current year. 13 out of 14 non-life insurance companies have treaty business agreements with them

In this year, the other portfolio companies have moved forward on the path of progress by acquiring the reinsurance business of 8 companies as motor and leading reinsurers.

Prompt payment of claims in insurance business is considered as a major weapon i.e. competitive ability but It is said that the insurance sector in Nepal is lagging behind in terms of claim payment, what is your opinion on this and what actions is being taken by Nepal Reinsurance Company to speed up the claim payment process? Since the insurance business is a business that provides quick relief and financial assistance to property owners and life insurance dependents at the time of loss, how easily and quickly the insurance company pays claims plays an important role.

As Nepal’s insurance market is an aging sector but has not achieved the expected success, the claim payment situation in this sector cannot be considered satisfactory due to the complications in the claim process, low use of technology, the practice of treating claims as an expense and the lack of sufficient skills related to claim management. There is also a risk that the insurance market itself could be negatively affected if various fraud cases in insurance claims are not addressed.

Therefore, I see the need for Nepal’s insurance market to make the process of claim payment easy and quick by discouraging claims-related fraud.

When it comes to Nepal Reinsurance Company, the flag bearer of the Government of Nepal, in the past, centralized authority related to claim payment, complicated paper process, lack of staff, lack of skills among staff and there was some delay in receiving claim information and essential documents from the insurance company in time, but the company’s claim payment has improved a lot in recent times. We will make further improvements in the coming days.The company In 2018-019, a total of 294 Rs. Claim amount of 289.8 million was paid. A.W. In 2022/23 alone, the number of paid claims reached 1482.

This year only Rs. 1 billion 65 million 83 million claims were paid. Thus, the company has paid a total of 25,153,100,000 claims, which is almost twice the current paid-up capital of the company. In addition to this, the company has been organizing various trainings and seminars for its employees and those working in the insurance market to improve their efficiency in claim payment and will continue to do so in the future.

Company rating plays an important role in reinsurance business. For this, what kind of reinsurance business is the rating initiative of the company? He used to say that surely, since the reinsurance business is a business that is done keeping in mind the international reputation and the status of the company’s consolidation, the rating of the company has a very important role. Since Nepal Reinsurance Company has not yet been rated at the international level, there are some challenges in the business.

We are confident that Nepal Reinsurance Company will be rated by an international organization within about 6-7 months after the agreement, and we are also sure that the size and volume of the company’s business will increase after the rating.

When will this company build its own building?

Tell me no.

This company, which has been operating in rented buildings for a long time, has moved forward with a plan to construct a building on its land with an area of ​​more than 4 plants in Shantinagar, Nayavaneshwar. Although there is some delay in this work as it has to be followed by the various laws and policies related to the construction, it will be laid and started this year. I would like to inform you that the work is being done with the plan to do it inside.

In today’s era of information technology, management information has a very big role, and in the context that it is said that the era is not paper, but computer, what is the strategy of Nepal Reinsurance Company related to digitization?

Certainly, today’s age is the age of information and the importance of information is very important in the insurance market.

Since insurance is done based on future risks, risk information is the same for business in terms of both insurance estimation and projection. In other words, for reinsurance, the data of 50 to 100 years has to be studied for the prediction of natural disasters and catastrophes, which is often impossible through the paper process.

In view of this situation, I would like to inform you that even though we have been using local technology until now, we have decided that the technology software cannot handle the business situation of the company and have gone ahead to purchase international level software. Hopefully, this international level software will be available this year. Work will be started after connecting inside.

A.W. Only in 2021.022 employees were recruited in this company. Now, the company does not need more employees. In 2022, 180, no employees were hired. Is the admission process stopped due to what or some other reason?

Of course In 2021.022, 28 employees have been recruited in 2 phases and after the recruitment of these employees, some improvements have been made in the company’s work and ease in the business environment has also been added. Now, it does not mean that more employees will not be needed after the 2-stage employee recruitment, but the company is in the process of realizing the need to amend the employee service conditions regulations.

The company has planned to hire more employees after the revision of the employee service condition regulations and there has been a delay due to some delays in the revision of the employee service condition regulations.

You said that there was a delay in the amendment of the staff regulations, could you please tell me what was the reason for the delay in the amendment of the staff service condition regulations which are directly related to the moral development of the employees?

Being the flag bearer reinsurance company of the Government of Nepal, we act in accordance with the policies, rules and regulations of the Government of Nepal. Therefore, the employee service condition regulation is also passed through the company’s human resources sub-committee, management, board of directors to the Nepal Insurance Authority, Ministry of Finance,

Although the process of revising the regulations has been initiated since 2021 Chaitra as the Public Service Commission and the Ministry of Law have to review and approve it, it is hoped that the regulations will be approved as soon as possible.

In view of the presence of domestic competitors, what plans and strategies have been made to make the company more competitive?

Nepal Reinsurance Company was established in a different environment and an organization with a different history, despite the absence of competitors and even after the presence of competitors, it is always moving forward in a strategic manner for the progressive path. In today’s time, we are moving forward keeping in mind both the size and quality of the business, keeping in mind the interests of the company’s customers, shareholders and employees.

In addition to this, the company completed the rating, which is very important for business expansion, diversifying the business and increasing its international reach, speeding up the work of international level database connection to further refine the company’s accounting and record management, and built a building on the company’s own land. Acting through said building,

Participating in international conferences and expanding business relationships with examples of the company’s strengths, introducing new insurance products in cooperation with foreign companies, holding various seminars and training programs for the development of the overall insurance market, bringing in strategic partners to further refine the company’s business,

Dedicating the employee service condition regulations to the interests of the employees, resuming the work of employee moral development and A.A. The determination made in the Annual General Meeting of 2021.022, the company is planning to make every possible effort to reduce the company’s expenses and increase its income, including the determination to give a dividend of at least 2 points to the noble shareholder.

Do you have anything to say at the end?Now we are making the company stronger and more capable by rating the company. A.W. The net worth of this company, which has a net worth of 12 billion 25 crores in 2018.019, is I want to inform you about the fact that in 2022/023 it has reached 20 billion 32 million. This company is entering the tenth year after completing the ninth year of establishment.

On the occasion of this company’s anniversary, I would like to thank the Government of Nepal, the Ministry of Finance, the regulatory body Nepal Insurance Authority, shareholders, dignitaries, business Associates, insurance experts from home and abroad, many associations that directly and indirectly support this company.

I would like to express my sincere gratitude to the employees and all related parties for their support in bringing this company to its present state of achievement, and also wish to express my best wishes to everyone on the occasion of the tenth anniversary. thank you.

Interview taken from Nepal Reinsurance Souvenir 2023.