The Government of Nepal has introduced new provisions in the Insurance Regulations, 2081 BS, requiring insurance companies to maintain capital in line with the level of risk they assume. The new regulations mandate insurers to hold risk-based capital in addition to the minimum paid-up capital set by the Nepal Insurance Authority.

Published in the Nepal Gazette on Tuesday, Clause 11 of the updated regulations states: "Insurers must maintain risk-based capital in addition to the minimum paid-up capital determined by the Authority."

Sushil Dev Subedi, spokesperson for the Nepal Insurance Authority, clarified that companies are now required to calculate their capital based on the risks they undertake.

"The regulations mandate insurers to hold additional capital based on risk, apart from the minimum paid-up capital set by the Authority," Subedi explained. "From now on, capital will be determined according to the risks accepted by the companies."

This move is intended to ensure that capital requirements are more closely aligned with the nature of each insurer’s business. Under Clause 36 of the Insurance Act, 2079, the Nepal Insurance Authority holds the authority to set the minimum paid-up capital for insurance companies.

In 2078 BS, the then Insurance Board (now renamed as Nepal Insurance Authority) had set a paid-up capital requirement of Rs 2.5 billion for non-life insurance companies and Rs 5 billion for life insurance companies. Although the deadline for insurers to meet these requirements was extended till mid-July, some companies have yet to comply.

The new regulations also pave the way for the establishment of an Insurance Information Center. Clause 155 of the Insurance Act allows for the creation of a center dedicated to the collection and management of insurance-related data. Furthermore, the regulations introduce provisions to blacklist individuals involved in insurance fraud, forgery, or other related crimes.

In addition, a framework has been introduced to investigate insurance fraud and scams. To facilitate these investigations, an expert group will be formed, led by the director of the Nepal Insurance Authority, and will include representatives from the Office of the Attorney General, a Deputy Inspector General (DIG) of Police, a CEO from an insurance company, and the head of the relevant department within the Nepal Insurance Authority, who will serve as the member secretary.

New Chairman Pledges Reform in the Insurance Sector

Sharad Ojha, the newly-appointed chairman of the Nepal Insurance Authority, has pledged to bring significant changes to the insurance sector during his four-year tenure.

Following his oath of office on Tuesday administered by Finance Minister Bishnu Paudel, Ojha stated, "The government has appointed me for a four-year term, and I want to assure you that by the end of my tenure, there will be noticeable changes in the insurance sector."

He added that he would work according to the action plan he has presented, building on the ongoing practices within the Authority.

The government had appointed Ojha as the chairman of the Nepal Insurance Authority on Monday.