Insurance Authority issued revised direction to reduce the distributable profits

Kathmandu : Regulatory body Nepal Insurance Authority has revised the financial statements of insurers for the first time. while long-term investment in seven sectors to the insurance companies to reduce distributable profits.

Director of the Insurance Authority, Dinesh Kumar Lal, has said that the Insurance Authority has revised the guidelines related to the financial statement of insurers using the authority given by Section 166 of the Insurance Act 2079.

Now all insurers will have to deduct from their distributable profits the investment made in hydropower and solar energy, tourism and airlines, agriculture, cable cars, education and health, real estate business and private equity funds and venture capital funds.

The Insurance Authority has brought guidelines to reduce distributable profits while investing in the long-term sector. That’s why companies have made guidelines to reduce distributable profits.

According to Director of the Insurance Authority Dinesh Kumar Lal informed that the amended guidelines of the Insurance Authority, the investment amount taken in the fields of hydropower and solar energy, tourism and air services, agriculture, cable cars, education and health, real estate business and private equity funds and venture capital funds should be deducted from the distributable profits.

Which investing in areas those of companies should reduce distributable profits? :

Hydropower and Total Energy Sector:

(a) If the those of public limited insurance company has invest in shares is not listed in accordance with the securities laws for 5 years from the date of investment, the amount of the investment accounted for by the insurer in the financial statement should be deducted while calculating the distributable profit.

  (b) If the required commercial operation date of the hydropower project is more than five years after the date of investment, if the investing company is not listed within the required commercial operation date, the insurer shall deduct the investment amount in this area from the distributable profits.

Tourism and aviation sector:

If the public limited company invested in shares by insurance companies is not listed according to the securities law for five years from the date of investment, the amount of the investment accounted for by the insurer in the financial statement should be deducted when calculating the distributable profit.

Agricultural sector:

(a) If a public limited company that has invested in insurance shares is not listed in accordance with the securities laws for 5 years from the date of investment, the amount of the investment accounted for by the insurer in the financial statement should be deducted when calculating the distributable profit.

(b) If there is a capital investment of five crores or less, if the company is not operating at a net profit after 3 years of investment by the insurer, the amount invested by the insurer in the said company should be deducted from the distributable profit in the financial year in which the loss occurred.

Cable car area:

(a) If a public limited company that has invested in insurance shares is not listed in accordance with the securities laws for 5 years from the date of investment, the amount of the investment accounted for by the insurer in the financial statement should be deducted when calculating the distributable profit.

(b) If there is a capital investment of five crores or less, if the company is not operating at a net profit after 3 years of investment by the insurer, the amount invested by the insurer in the said company should be deducted from the distributable profit in the financial year in which the loss occurred.

 Education and Health Sector:

(a) If the public limited company invested in shares by insurance companies has not been listed in accordance with the securities laws for 5 years from the date of investment, the amount of the investment accounted for by the insurer in the financial statement should be deducted while calculating the distributable profit.

(b) In the case of an organization that is in operation before the investment by insurance companies, until the company is listed, if the organization is not operating at a net profit after 2 years from the date of investment, there is a provision that the amount invested by the insurer in the company should be deducted while calculating the distributable profit in the financial year in which the loss occurred.

Real estate business sector:

If the investment amount in the insurance real estate business sector is not completed by the project construction period, the distributable profit will have to be reduced.

Private equity fund and venture capital fund sector:

If the net asset value of the investment in the fund is lower than the amount of the investment in the private equity fund and venture capital fund approved by the Securities Board to do business by the insurance companies according to the specialized investment fund, the difference between the amount in the account and the net asset value of the investment in the fund should be deducted while calculating the distributable profit.