Dollar Exchange Restrictions Put Pressure on Reinsurance Brokers in Nepal

Kathmandu — Reinsurance broker companies operating in Nepal are facing operational difficulties due to regulatory limitations that prevent them from accessing foreign currency exchange facilities. The issue stems from current provisions under the Nepal Rastra Bank Act, which allow only banks and insurance companies to exchange U.S. dollars, leaving reinsurance brokers unable to directly settle payments with foreign reinsurers.

As a result, Nepali reinsurance brokers have been compelled to route their business through foreign intermediaries, often surrendering up to 50 percent of their commissions to these firms in the process. Industry insiders say this has significantly eroded their ability to grow and sustain operations.

Established in 2078 B.S. after the then-Insurance Board issued licenses to ten reinsurance broker companies, these firms were introduced to break the longstanding monopoly of foreign brokers and to strengthen domestic capacity in reinsurance consultancy and placement. Despite meeting regulatory requirements and entering the market with high expectations, their growth has been constrained by what they describe as an “institutional oversight” in regulatory coordination.

One of the core challenges, brokers say, is the inability to remit payments for reinsurance premiums when working as intermediaries between Nepali insurers and international reinsurance providers. Without dollar exchange privileges, brokers cannot fulfill their contractual responsibilities, disrupting both client relations and business flow.

While the previous leadership at the Insurance Authority had initiated efforts to address this issue by coordinating with Nepal Rastra Bank, current officials say there has been little progress. Spokesperson and Director of the Authority, Sushil Dev Subedi, confirmed that the Authority has formally requested guidance from Nepal Rastra Bank.

“As per the law, banks and insurance companies are authorized to exchange dollars. For other entities, the law requires a separate process with set criteria. We have sent a formal request to Rastra Bank, but no response has been received yet,” Subedi stated.

Reinsurance brokers argue that the lack of a clear policy or mechanism to facilitate foreign currency transactions is discouraging for domestic firms and undermines Nepal’s long-term goal of building local expertise in the reinsurance space.