Insurance Authority came up with easy facility for insurance companies with insufficient paid-up capital, except Asian Life

Kathmandu : The Nepal Insurance Authority is going to implement a system that allows companies that have not yet paid their paid-up capital to calculate the amount in reserve. The Authority is making preparations for under-capitalized insurance companies to count reserve capital as core capital for the purpose of reaching paid-up capital.

Insurance companies that have not reached the paid-up capital and have issued IPOs at a premium, are Citizen Life, IME Life, Sun Nepal Life and Reliable Nepal Life which will be allowed to calculate the amount collected for the premium to reach the paid-up capital of five billion. They will not be able to spend such amount or distribute dividends but that amount should be stored in the fund.

The amount accumulated in the fund will be counted as paid-up capital, and the four companies will be able to pay the profits earned in the past as dividends. Surya Prasad Silwal, chairman of the authority, said that permission was given to issue shares at a premium for the purpose of increasing the paid-up capital.

Recently, the Public Accounts Committee called the premium IPO illegal and directed the authority to return the premium amount. Soon after that, the authority instructed the insurance companies to create a fund and keep a reserve for the companies that have issued IPO at a premium without spending the money from the IPO premium. Although the Authority has given permission to issue IPO at a premium to meet the paid-up capital by distributing bonus shares, following the instructions of the Audit Committee, it has instructed to keep the premium amount in a separate reserve. Authority chairman Silwal said that now the same reserve will be considered as paid-up capital and only the insufficient amount will be deposited through other means.

Chairman Silwal said, “In the case of companies whose paid-up capital is less than 5 billion, we also consider the amount in reserve as paid-up capital. By doing so, everyone’s paid-up capital will be enough. You cannot spend the money raised from the premium elsewhere. Now the authority also considers ‘Reserve as capital’. If the authority says so, everyone’s capital will be enough.”

According to Chairman of the Authority Silwal, it is seen that if the paid-up capital is considered by including reserve, the paid-up capital of most of the life insurances will be reached.

Among the 12 life insurance companies,in the case of Asian Life Insurance, it is seen that the paid-up capital will not be enough even if the reserves of the company are added. Based on the first quarter financial statement, Asian Life’s paid-up capital and reserves have reached 3.53 billion rupees. Due to which the company is preparing to issue rights shares.

The company said that as the company could not hold the general meeting of the last fiscal year, the company could not send a letter to the authority for the rights. Since the actuary valuation of the authority has been passed, only the general meeting is left, after all the decisions are taken by the company through the general meeting, the company will be able to apply to the authority for rightful shares.

Only three life insurance companies have reached the specified capital within the time specified by the authority. The authority had instructed the life insurance company to reach the paid-up capital of five billion by the end of last year.

As most of the companies were unable to pay the paid-up capital, even though they extended three more months until the mid of July, 2023 A.D but only three companies have paid up the prescribed paid-up capital. According to the financial statements of the first three months of the current fiscal year (2079/80 B.S i.e 2023 A.D), only Nepal Life Insurance, Himalayan Life Insurance and National Life Insurance have reached the prescribed paid-up capital.

According to the financial statement of the first quarter of the current financial year, the paid-up capital of Himalayan Life Insurance is 8 ​​billion 20 million 300 thousand Rupees, while the paid-up capital of Nepal Life Insurance has reached 8 billion 207 million 900 thousand Rupees. Likewise, the paid-up capital of National Life Insurance has reached 5 billion 11 million 600 thousand Rupees.

Himalayan Life Insurance is a company formed by the merger of three life insurance companies namely; Prime Life, Gurans Life and Union Life, whereas Nepal Life and National Life have raised their paid-up capital to over 5 billion by issuing their bonus shares.