ICRA Nepal Downgrades Nepal Re’s Credit Rating Over Flood Claims Exposure, Keeps Negative Watch

Kathmandu – ICRA Nepal has downgraded Nepal Reinsurance Company Limited’s issuer credit rating from ‘ICRA NP-IR A’ to ‘ICRA NP-IR A-‘, citing the reinsurer’s potentially large exposure to claims from the devastating August 26 flash floods. The company remains on ‘watch with negative implications.’

The ‘W’ notation attached to the rating signals that further review is pending, while the plus/minus modifier reflects the company’s relative standing within its rating band, ICRA Nepal said.

A rating in the ‘A-‘ category still denotes adequate capacity to meet financial obligations on time and is generally associated with low credit risk. However, the downgrade reflects the agency’s view that Nepal Re’s risk exposure could climb further as flood-related claims are finalized.

The August 26 floods killed and displaced people across affected river basins, destroyed hydropower infrastructure with a combined capacity of roughly 700 MW, and swept away vehicles, including private and commercial units awaiting customs clearance, along with other insured property.

ICRA Nepal expects total insurance claims from the disaster to rise substantially, which would in turn increase Nepal Re’s own share of the payout as the country’s domestic reinsurer. The agency cautioned that the company’s existing risk protection arrangements, namely its retrocession cover, may not fully absorb claims of this scale. Should that cover fall short, Nepal Re could be forced to pay a significant portion from its own resources, further eroding a net worth that was already under strain.

That strain predates the floods. Nepal Re’s net worth had already been weakened by claims stemming from the September 2025 riots. Stacking substantial flood claims on top of that unresolved burden could put additional pressure on both its financial position and liquidity, ICRA Nepal noted.

The final size of flood-related claims, and Nepal Re’s precise share of them, has not yet been determined. ICRA Nepal said this uncertainty will be the central factor in any future rating action.

Nepal Reinsurance Company Limited traces its origins to the “Insurance Pool” set up in 2003 to cover losses from riots, vandalism, terrorism, and other malicious acts during the Maoist conflict. Following a Cabinet decision to convert the pool into a formal reinsurance company, Nepal Re was incorporated on November 7, 2014, under the Companies Act, 2006, and began operations that December. It was Nepal’s first domestic reinsurance company.

As of mid-July 2025, Nepal Re reported paid-up capital of about NPR 13.42 billion and net worth of approximately NPR 20.53 billion. Promoters hold 84 percent of shares and the public 16 percent. Within that structure, the Government of Nepal holds around 44 percent, non-life insurers about 27 percent, life insurers around 6 percent, and public limited companies roughly 7 percent.