Beema Samiti publishes new directives regarding permissible investment by insurance companies; paves path for insurance companies to invest in most of the sectors

Insurance Regulatory Authority of Nepal “Beema Samiti” has published new directives regarding the investment limit in various aspects for the Insurance Companies.

As per the new directives, the insurance companies can now invest in land and building up to 5% which was not available before. Companies investing in land and building are required to value their investments every three years and any investment apart from that requires daily valuation as per the new directives.

Regardless of the reason, if the investment amount falls below or increases above the mentioned bracket, the company will be required to bring the investment inside the mentioned bracket within three working days. Earlier, investment bracket in government securities was below 20%. This has been decreased to 5% in the new directives.

The companies will be required to take prior approval from the Beema Samiti if they wish to invest in a particular company or sector more than the predetermined bracket.

Insurance companies will be required to invest 40% of technical reserve in the fixed deposit of commercial bank or Nepal Infrastructure Bank. Earlier, this limit was set at 35% of the technical reserve.

The insurance companies will be allowed to invest 10% of the technical reserve in the listed companies of stock market. Similarly, an investment of 20% of the technical reserve will be allowed in the authorized shares and debt instruments of BFIs who have received license from the NRB. However, the investment should be less than 10% of the paid up capital of the company.

The companies can invest 20% of the technical reserve in secured debentures of listed companies and 20% of technical reserve in infrastructure sector. However, if they want to investment more than 20%, prior approval of the Beema Samiti is required.

Insurance companies can invest up to 5% of the technical reserve in Citizens Investment Trust and mutual fund schemes. The bracket for investment in fixed deposits of development banks is set at 20% of the technical reserves. Similarly, they can invest up to 10% of the technical reserves in the fixed deposits of ‘C’ class finance companies.

For the purpose of investment, the insurance companies will be required to ascertain their technical reserve amount. This requires the audited financial reports of the previous year. The insurance companies will be required to complete the process of audit of financial reports to be eligible to invest in the above mentioned sectors.

If the companies have not audited their financial reports, they will be required to deposit majority of the amount in banks.

The new directives have paved path for the investment to flow from insurance companies to other innovative sectors as well.