Insurance company investment area can be be expanded bank fixed deposit varies

Kathmandu : It seems that insurance companies are not yet able to take the risk of investment. The regulatory body Nepal Insurance Authority has not yet been able to get rid of the fixed deposits of banks. Although the Nepal Insurance Authority has opened the way to invest in various sectors. It has been found that the investment of insurance companies is limited to the fixed deposits of banks and financial institutions.

Since the companies are not able to diversify the investments are more focused on fixed deposits and shares.

According to the authority’s data life insurance companies have invested a total of 6 billion rupees and non-life insurance companies have invested 60 billion rupees till October of the current financial year (FY) 2023/24. Out of that, 77 percent of the life insurance company and 79 percent of the non-life insurance company have been kept in fixed deposits of banks and financial institutions.

Among the fixed deposits, the highest investment has been seen in commercial banks. After insurance companies complained that they were not able to diversify their investments then Insurance Committee (now the Insurance Authority) amended the investment guidelines in 2020 March in addition to fixed deposits and shares they were allowed to invest in real estate business water resources, agriculture, tourism and other infrastructure and production. It opened the way for investment in the area.However, even after 5 years of the changes in the guidelines, it has been seen that the insurance companies have not been able to invest in the new sector.

According to the guidelines, insurance companies can invest a minimum of 40 percent of their total technical reserves in commercial banks, a minimum of 40 percent in fixed deposits of infrastructure development banks, a maximum of 20 percent in development banks and a maximum of 10 percent in finance companies. According to the guidelines, insurance companies can invest a minimum of 40 percent of their total technical reserves in commercial banks, a minimum of 40 percent in fixed deposits of infrastructure development banks a maximum of 20 percent in development banks and a maximum of 10 percent in finance companies.

There is a provision to invest up to 20 percent in bonds of listed companies up to 20 percent in infrastructure including agriculture. Tourism and water resources and up to 5 percent in civic investment funds and mutual funds. However, companies have not been able to diversify their investments according to the provisions of the guidelines. Most of their investments are concentrated in fixed deposits of banks and financial institutions followed by bonds and the stock market.

According to the guidelines, the companies could not invest. “According to the demand of the insurance companies, we have opened various areas of investment by changing the guidelines,” he said, “but they do not want to take the risk.” The committee issued instructions to invest according to the guidelines in the year 2021, saying that the insurance companies did not invest in the field of infrastructure development, but the companies did not pay attention to it.

The committee issued instructions to invest according to the guidelines in the year 2021 saying that the insurance companies did not invest in the field of infrastructure development but the companies did not pay attention to it.

The chief executive officer of one of the companies said that insurance companies do not want to take the risk of investment because the interest rates on fixed deposits are good recently. “Currently, the return from bank interest is good,” he said, “in this situation, companies do not want to take risks by investing in other sectors.”He said that there is no provision for mandatory investment in the infrastructure sector and companies do not have the expertise so they are not attracted towards it.