ICRA Nepal Assigns ‘A’ Rating to Sagarmatha Lumbini Insurance Company
Kathmandu — ICRA Nepal has assigned an issuer rating of ‘ICRA NP IR A’ to Sagarmatha Lumbini Insurance Company Limited (Salico), reflecting the company’s strong financial fundamentals and timely debt servicing capabilities.
The ‘A’ category rating denotes that Salico carries low credit risk and has adequate capacity to meet its financial obligations on time. This rating reflects the company’s overall financial reliability, although it does not apply to any specific debt instrument.
According to ICRA Nepal, the rating was driven by Salico’s stable business operations, healthy financial position, and experienced management team. The company is a result of the March 2023 merger between Sagarmatha Insurance, operating since 1996, and Lumbini General Insurance, established in 2005. The consolidation has significantly expanded Salico’s total assets, market presence, and operational scope, positioning it as a major player in Nepal’s non-life insurance sector.
ICRA Nepal highlighted several key strengths supporting the rating. These include the company’s strong solvency ratio of 2.76 times in 2079 BS, well above the minimum regulatory requirement of 1.3 times. The presence of institutional promoters such as Sri Lanka-based Ceylinco Holdings PLC on Salico’s board and a seasoned management team have further enhanced its governance and strategic direction.
However, the rating also takes into account emerging challenges following the merger. Floods during the first nine months of FY 2081 BS led to a surge in claim liabilities, adversely affecting underwriting performance. During that period, the company registered claim amounts worth Rs 1.09 billion, of which Rs 495 million has already been paid.
The company also posted underwriting losses due to a decline in premium income and a spike in the combined ratio from 96 percent to approximately 103 percent. Furthermore, lower investment income and high exposure to the motor insurance segment — which accounts for 36 percent of gross premium and 70 percent of net premium — have placed additional pressure on profitability.