Insurer’s Reinsurance Directive Amended, Reinsurance Provisions Tightened Further
Kathmandu — The Nepal Insurance Authority has made a fourth amendment to the “Insurer’s Reinsurance Directive, 2023/2024.” The directive notes that the most recent amendment took place on August 9, 2026. The purpose of the directive is to systematize the reinsurance arrangements of insurers conducting life and non-life insurance business.
Risk diversification in reinsurance made mandatory
The directive requires insurers to obtain reinsurance for risks they cannot retain, or for the portion of risk remaining after retention. When obtaining reinsurance, adequate analysis of risk diversification and the insurer’s technical and financial capacity must be carried out.
Priority given to domestic reinsurers
When obtaining reinsurance, insurers are required to transact with domestic reinsurers licensed by the Nepal Authority, or with foreign reinsurers licensed by the regulator of the relevant country and listed with the Authority.
At least 30 percent of the remaining reinsurance to stay domestic
According to the directive, after providing the direct share to a domestic reinsurer, at least 30 percent of the remaining share must be provided to a domestic reinsurer.
Reinsurance policy to be approved by the board of directors
For each fiscal year, insurers must prepare a reinsurance policy based on their net worth, risk underwriting, reinsurance risk-retention capacity, and overall financial capacity. This policy must be passed and implemented by the board of directors before the end of the fiscal year.
Insurers must also obtain adequate catastrophe reinsurance for catastrophic risk, taking into account the risk retained under the policies they issue as well as the additional risk arising from reinsurance arrangements.
Must transact with rated reinsurers
For treaty reinsurance, insurers must transact with reinsurers holding the specified minimum financial strength rating. A minimum rating is also specified for facultative reinsurance.