General Insurance Association Nepal Urges Reforms in Reinsurance and Reserve Fund Policies

Kathmandu —General Insurance Association Nepal (GIAN) has formally requested the Nepal Insurance Authority to address several challenges within the country’s insurance regulatory framework, particularly concerning reinsurance and reserve fund provisions.

In a statement issued by the association, concerns were raised regarding the current structure of mandatory direct share allocations to local reinsurance companies, including Nepal Reinsurance Company. The association highlighted inconsistencies between the existing practice and the Insurance Act 2079, especially the provision requiring a fixed percentage of risk to be allocated equally to domestic reinsurance firms.

Currently, insurers are required to allocate 6 percent of their business to each of the two domestic reinsurance companies. This is expected to be reduced to 4 percent each in the coming fiscal year. The association has proposed that this quota either be shared equally or distributed in a manner that avoids placing an unfair burden or advantage on either company.

Referring to Section 81(1)(c) of the Insurance Act, the association pointed out that the law mandates a minimum percentage of reinsurance to be conducted within the country but does not specify equal distribution. It urged that insurers be allowed to reinsure only the remaining risks beyond what they retain, in line with the original intent of the legislation.

The association also expressed concern over operational inefficiencies, noting that local reinsurance firms often accept low-risk cases while declining high-risk ones. This has caused delays in issuing insurance policies, affecting customer service and reliability. It also warned that these practices, coupled with high reinsurance fees, may negatively impact Nepal’s reputation with international reinsurers.

In addition, the association called for a reduction in the reserve fund requirement. It recommended lowering the current provision from 50 percent to 20 percent, stating that the existing level places an unnecessary financial burden on insurers.

Finally, the association emphasized the need for representation of private insurance company operators in the board of Nepal Reinsurance Company to ensure broader industry participation in decision-making.