Nepal Reinsurance Fails in Risk Management, Credit Rating Downgraded from ‘Double A Minus’ to ‘A’

Kathmandu — The credit rating of Nepal Reinsurance Company Limited has been downgraded. ICRA Nepal has lowered the company’s issuer rating from the earlier ‘Double A Minus’ level to ‘A’.

At the same time, the company has been kept under a “watch with negative implications” status as before. The new rating indicates that while the company still has adequate capacity to meet its financial obligations on time, its credit risk has increased compared to the previous assessment.

According to ICRA Nepal, insurance claims related to damages from the Gen-Z movement that took place in September last year have significantly affected the company’s financial position. During the incident, the company retained a large portion of riot-related risk on its own account.

By mid-January 2026, the company had received claims worth around NPR 11.51 billion, of which it is estimated to bear about 86 percent itself.

ICRA Nepal concludes that this will lead to significant losses in the company’s reinsurance business, a notable decline in net asset base, weakening of solvency (ability to meet obligations), and pressure on liquidity. However, the company’s solvency position is still expected to remain at the required level. Continuous declines in investment returns in recent quarterly periods have also added pressure on overall profitability.

The company has already paid out around NPR 3.70 billion by mid-January in claim settlements and advance claim payments. The final amount of claims yet to be paid will determine the extent of impact on the company’s financial and liquidity position, making this a key area of monitoring.

ICRA Nepal has also raised concerns over the company’s high geographical concentration in its business. More than 90 percent of its total reinsurance premium is still concentrated within Nepal. Although the company has been operating since 2014, its expansion in international markets has remained relatively modest, according to the report.

Since the company’s business base is largely supported by regulatory provisions, any future regulatory changes are also considered a significant risk.

Similarly, competition from private sector reinsurers and established foreign reinsurance companies operating in Nepal remains a major challenge for the company, ICRA Nepal noted.

However, the report also highlights some positive factors supporting the rating. The Government of Nepal holds around 44 percent ownership in the company, along with significant participation from other institutional investors in the insurance sector. This strong ownership structure has helped maintain confidence in the company, according to ICRA Nepal.

The Government of Nepal has recently announced an increase in the portion of reinsurance business to be directly ceded to the company. Since directly ceded business is generally considered more profitable than treaty-based reinsurance, this is expected to support an increase in future premium income. However, regulatory directives on this have not yet been issued.

The Nepalese reinsurance industry’s concentration among a limited number of players, the company’s established stakeholder reach, large business scale, and regulatory support are key factors in its assessment. ICRA Nepal has identified future regulatory changes, the company’s ability to improve profitability after FY 2025/26, and its capacity to maintain adequate solvency and liquidity as key monitoring factors.

Nepal Reinsurance Company Limited is the country’s first reinsurance company. It originated from an insurance fund established in 2003 to manage risks of financial losses caused by riots, vandalism, terrorist activities, and planned damages during the then Maoist conflict.

Later, following a decision by the Council of Ministers of the Government of Nepal, the fund was converted into a reinsurance company. Accordingly, Nepal Reinsurance Company Limited was established under the Companies Act, 2003 on November, 07, 2014. The company formally began operations in December of same year.

In the company’s shareholding structure, promoters and the general public hold 84% and 16% respectively. Major shareholders include the Government of Nepal (44%), non-life insurance companies (27%), life insurance companies (6%), public limited companies (7%), and general investors (16%).