The Nepal Insurance Authority (NIA) has extended the deadline for reinsurance companies to meet their capital requirement by one year, giving them until the end of January 2026 to comply. Initially, the NIA had directed reinsurance companies to increase their paid-up capital to Rs 20 billion by January 2025, as per a directive issued on January 31, 2024. However, due to the companies’ inability to meet the target, the deadline was revised in December 2024.

According to Shamba Raj Lamichhane, head of the NIA’s Legal Department, the extension was granted after it became evident that the companies could not raise the required capital within the original timeframe.

Currently, two reinsurance companies operate in Nepal: Nepal Reinsurance Company and Himalayan Reinsurance Company. Both have already issued initial public offerings (IPOs). Nepal Reinsurance has a paid-up capital of Rs 13.42 billion, while that of Himalayan Reinsurance stands at Rs 10.40 billion. To meet the Rs 20 billion requirement, Nepal Reinsurance needs an additional Rs 6.57 billion, and Himalayan Reinsurance requires Rs 9.60 billion.

Himalayan Reinsurance plans to issue 80% rights shares, based on a proposal approved at its annual general meeting on March 3, 2024. The company will issue rights shares worth Rs 8.32 billion in the ratio of 10 shares to 8, calculated on its current paid-up capital of Rs 10.40 billion. Additionally, it will distribute 4% bonus shares from the profits of FY 2022/23.

Following the rights issue, Himalayan Reinsurance’s paid-up capital will increase to Rs 18.72 billion, leaving a shortfall of Rs 1.28 billion to meet the NIA’s requirement. The company also raised Rs 3.18 billion in premium by selling 30 million shares at Rs 206 each during its IPO. If the Supreme Court allows the capitalization of the premium amount into shares—a matter currently under review—Himalayan Reinsurance can potentially close the capital gap.

Despite plans to increase capital through bonuses and rights shares, technical challenges have delayed the companies’ progress. Neither Nepal Reinsurance nor Himalayan Reinsurance has held their annual general meetings for the last fiscal year.

Himalayan Reinsurance distributed dividends for the first time from its profits in FY 2022/23, while Nepal Reinsurance has been consistently distributing dividends since FY 2019/20. Companies utilizing bonus shares and rights shares to raise capital can also issue bonus shares from previous years' profits to meet the capital requirement.