10 Life Insurance and 8 non-Life Insurance Company’s Due to Reach Minimum paid Capital Loss

Kathmandu : The time has passed when the paid-up capital set by the Nepal Insurance Authority should reach five billion for life insurance and two and a half billion for non-life insurance. However, the life insurance companies and 8 non-life insurance companies operating in Nepal have not yet reached the minimum paid-up capital. Due to the impractical instructions given by the Regulatory Insurance Authority to add billions of paid-up capital within one year, insurance companies are not able to add paid-up capital even if they want to.

Due to the panic created by the regulatory Nepal Insurance Authority to reach the paid-up capital, even though a total of 19 insurance companies, including nine life insurance companies and 10 non-life insurance companies, have gone through mergers, most of them have not yet reached the paid-up capital.

While Central Bank has put forward a long-term and strategic plan for capital growth up to 2028 for wallets worth five crores, the decision was taken to increase the capital by two and a half times in the insurance sector. It seems that it will take more time to achieve the goal of capital increase without looking at the implementation aspect.

By the first quarter of the current financial year 023/024, the paid-up capital of life insurance companies has reached 57 billion rupees. According to the unrefined financial statements for the first quarter of the current year published by the life insurance companies, the total paid-up capital of the life insurance companies has increased significantly in this year compared to the previous year.

In the same period last year the paid-up capital was 53 billion 1485 million rupees, while in the first quarter of the current year it was 57 billion 489 million rupees. The total paid-up capital of non-life insurance companies is 25 billion 47 crore 68 lakh rupees.

Despite the increase in paid-up capital, the paid-up capital of 10 life insurance companies is yet to be completed. Some companies got the opportunity to issue IPO at a premium price, while some are in a campaign to increase the paid-up capital by selling shares through rights issue. However, the paid-up capital of insurance companies has increased significantly in the last one year.

What is the plan of the life insurance companies that have yet to reach the minimum paid-up capital?

1) Asian Life Insurance

Asian Life Insurance is going to issue rights to meet the minimum paid-up capital set by the insurance authority. The authority has already approved the company to issue 42 percent rightful shares. Currently, the company’s paid-up capital, which is 3.15 billion 53 million rupees, will reach 4.48 billion 5 million rupees after 42 percent rights issue. The company said that the company plans to make up the remaining insufficient capital through bonus shares.

2) LIC Nepal

LIC Nepal has gone ahead with the plan to issue 87 percent of the rights to meet the minimum paid-up capital as directed by the authority. The company has sought permission from the Nepal Securities Board to issue 2 crore 34 lakh 68 thousand shares in the ratio of 1:0.8845. If the board allows the issuance of rights shares as a result, the company’s paid-up capital will reach five billion. The insurance authority had not yet given such a large issuance permission to other insurance companies.

LIC Nepal has been allowed to issue such a large number of vouchers due to the fact that LIC India is the main owner of neighboring country India. The company is allowed to issue more than 50% rights because the company cannot apply the merger option and other arrangements to participate in the capital increase plan. LIC is currently in the process of issuing rights shares. The company does not need to use any complicated equipment to reach five billion.

3) Suryajyoti Life Insurance

In order to meet the minimum paid-up capital set by the Insurance Authority, Suryajyoti Life Insurance is going to issue 10 percent right shares. Currently, the company’s paid-up capital is 4.54 billion 55 million rupees. Even after the merger between Surya Life and Jyoti Life, the company said that it has proceeded on the way to issue rights after the prescribed paid-up capital was not reached.

4) Prabhu Mahalakshmi Life

For the minimum paid-up capital, Prabhu Mahalakshmi Life Insurance has prepared to issue 17 percent right shares. The Insurance Authority has already granted permission to the company to issue 17 percent right shares. The paid up capital of Prabhu Mahalakshmi, formed by the merger of Mahalakshmi Life and Prabhu Life, is currently 4 billion 29 crore 96 lakh rupees. After the company issues the rights, the minimum paid-up capital specified by the authority will be reached.

5) Sanima Reliance Life

Sanima Reliance Life is going to issue 20 percent right shares to meet the minimum paid-up capital as directed by the authority. Currently, the company’s paid-up capital is 4 billion 184 million rupees. After the rights issue, the company’s paid-up capital will reach 5 billion 28 million rupees.

6) Reliable Nepal Life

Reliable Nepal Life has raised its paid-up capital to four billion by issuing an IPO at a premium price. Dipeshbabu Tiwari, the information officer of the company, said that the remaining 1 billion capital of the company will be compensated by issuing bonus shares.

Sanima Reliance Life is going to issue 20 percent right shares to meet the minimum paid-up capital as directed by the authority. Currently, the company’s paid-up capital is 4 billion 184 million rupees. After the rights issue, the company’s paid-up capital will reach 5 billion 28 million rupees.

7) Citizen Life

The Chief Executive Officer (CEO) of Citizen Life said that there is a plan to meet the minimum paid-up capital set by the Insurance Authority by issuing bonus shares from reserve funds and distributable profits.

8) National Life Insurance Company

The National Life Insurance Company has no difficulty in meeting the minimum paid-up capital set by the authority. As it is a company owned by Nepal Rastra Bank, Nepal Bank and the Ministry of Finance, it is said that there is no difficulty in achieving the minimum paid-up capital.

However, it may take years to implement this decision. The National Bank has already provided its share of capital, while Nepal Bank and the Ministry of Finance have also agreed to provide the required capital. From which the minimum paid-up capital of the company will be managed.

9) IME Life

As of the review period, IME Life’s paid-up capital is 4 billion rupees. IME Life still needs 1 billion rupees to meet the minimum paid-up capital set by the authority. The Company Secretary of IME Life Insurance Company, Prakash Neupane, has said that there is a possibility that the next annual general meeting can decide on the minimum paid-up capital set by the authority.

10) Sun Nepal Life Insurance

Sun Nepal Life Insurance has taken a strategy to reach five billion rupees in paid-up capital without using the option of merger in the capital increase plan. Currently, the capital increase of the company is 3 billion 20 million rupees. The company is going to use right share and bonus share distribution to participate in the capital increase plan. It is being discussed and has not been finalized yet.

Sun Nepal Life Insurance has taken a strategy to reach five billion rupees in paid-up capital without using the option of merger in the capital increase plan. Currently, the capital increase of the company is 3 billion 20 million rupees. The company is going to use right share and bonus share distribution to participate in the capital increase plan. It is being discussed and has not been finalized yet.

In the non-life insurance sector, 8 companies are left to increase the payout. After the capital increase of most of the companies that went for merger was not enough, the owners of some of the old companies started regretting the merger.

Non-life insurance companies

The Nepal Insurance Authority has set a minimum capital increase of Rs 2.5 billion for non-life insurance companies. According to the authority’s decision, 4 non-life insurance companies have reached the minimum capital. In which the paid-up capital of Shikhar Insurance has already been reached as prescribed by the authority, while all other companies needed merger or additional capital.

Among the operating non-life insurance companies, 3 companies have reached the minimum paid-up capital set by the authority after the merger. Under which IGI Prudential Insurance, Siddharth Premier Insurance and Sagarmatha Lumbini Insurance have merged with their respective companies and provided the required paid-up capital.

IGI Prudential Insurance has the highest paid-up capital during the review period. The paid up capital of this company is 3.2 billion rupees. Similarly, Siddharth Premier Insurance has 2.80 billion rupees, Shikhar Insurance has 2.65 billion rupees and Sagarmatha Lumbini Insurance (Salico) has 2.62 billion rupees.

Non-life insurance companies planning to provide paid-up capital through equity

1) NLG Insurance

Among non-life insurance companies, NLG Insurance is going to issue rights shares in the highest percentage. The company is about to issue 66 percent right shares to meet the minimum paid-up capital set by the Insurance Authority. After the issuance of the rightful shares, the capital of the company will reach 2 billion 42 million rupees.

2) Himalayan Everest

The paid-up capital of Himalayan Everest Insurance Company is 2.3 billion rupees. In order to reach the minimum paid-up capital set by the authority, the company has started discussions on the issue of 12 percent right shares. After the 12% rights issue, the company’s paid-up capital will reach 2.57 billion 77 million rupees.

3) Neco Insurance

Neko Insurance Company is going to issue 25 percent right shares. The company is about to issue rights to meet the minimum paid-up capital set by the insurance authority. After the rights issue, the capital of the company will reach 2 billion 51 crore 54 lakh rupees.

4) Sanima GIC Insurance

According to the insurance authority’s policy, GIC Insurance has prepared to issue 25 percent rights shares in Sanima, which has been merged first. The company is about to issue rights to meet the minimum paid-up capital set by the insurance authority. After the rights issue, the company’s paid-up capital will reach 2.5 billion rupees.

5) United Azod Insurance

United Azod Insurance Company has prepared to issue 32 percent rightful shares. Rights shares are going to be issued to meet the minimum paid-up capital as per the instructions of the Insurance Authority.

6) Nepal Insurance

Nepal Insurance is going to issue 45 percent right shares to meet the minimum default capital set by the Insurance Authority. The company is about to issue rights shares to meet the minimum paid-up capital set by the insurance authority.

7) Prabhu Insurance

Prabhu Insurance is going to issue 45 percent right shares. The company is preparing to issue rights shares to meet the minimum capital set by the insurance authority. In addition, the company has put up for sale 19 lakh 79 thousand 424 shares owned by Nepal Reinsurance Company. The company has brought the share for sale at Rs. 280 per share.

8) National Insurance Company

National Insurance Company is a government owned company. The minimum capital set by the authority is going to be collected by the Ministry of Finance in coordination.

Apart from this, Met Life is a foreign company with no paid up capital. Similarly, National Insurance and The Oriental Insurance Company are working as only branch offices of Indian insurance companies in Nepal.