Life Insurance Companies Take Strategic Measures To Fulfil Capital Requirements Set by Insurance Authority
In order to fulfil the capital requirements set by Nepal Insurance Authority (NIA), life insurance companies in Nepal have been diligently implementing various strategies. Previously, the regulatory body had urged these companies to raise their paid-up capital to Rs. 5 Arba by the end of Chaitra 2079.
However, the deadline to enhance paid-up capital was extended till Ashad's end due to numerous insurance companies' failures to maintain the minimum capital required by the board. To meet the specified capital requirement, insurance companies have adopted various strategies, including pursuing mergers.
Until last year, there were 19 life insurance companies. Out of that, 12 companies were listed in NEPSE, 4 companies was in the process to go public, whereas, 3 were reluctant to issue an IPO. After the NIA minimum capital requirement directives, companies were compelled to go for merger. Hence 9 companies have merged reducing to 4 companies, due to which the total number of listed companies has come down to eight. Whereas, 4 are in the final process to issue IPO to the general public and 2 are still reluctant to go public. However, despite these consolidation efforts, several companies are still facing capital deficits.
Merged Life Insurance Companies:
Other Listed Life Insurance Companies:
Non-Listed Life Insurance Companies:
Life Insurance Companies In Process of IPO Issuance:
SuryaJyoti Life Insurance Company, Prabhu Mahalaxmi Life Insurance, and Sanima Reliance Life Insurance Company remain in a capital deficit of Rs. 46 Crores, Rs. 71 Crores, and Rs. 82 Crores, respectively. Additionally, Asian Life Insurance Company and Life Insurance Corporation Nepal (LICN) are also grappling with capital deficits of Rs. 1.85 Arba and Rs. 2.35 Arba, respectively. However, LICN has announced its intention to issue 88.45% rights shares to increase its capital.
IME Life Insurance Company, Reliable Nepal Life Insurance Company, Citizen Life Insurance Company, and Sun Nepal Life Insurance Company are all facing capital deficits even after the issuance of their initial public offerings (IPOs). IME Life Insurance Company and Reliable Nepal Life Insurance Company's capitals will only reach Rs. 4 Arba, resulting in a deficit of Rs. 1 Arba each. Similarly, Citizen Life Insurance Company's deficit will amount to Rs. 1.25 Arba, as its capital will only reach Rs. 3.75 Arba. Sun Nepal Life Insurance Company will face a deficit of Rs. 1.8 Arba, with its capital reaching only Rs. 3.2 Arba. Despite the equity gap, these companies may consider issuing bonus shares and right shares using the premium amount obtained from the IPOs.
Mr. Raju Raman Paudel, the spokesperson of the Nepal Insurance Association (NIA), excerpts that to bridge these capital shortfalls, companies will be issuing the right shares or bonus shares based on their fiscal year-end balance sheets. This strategic move aims to meet the prescribed paid-up capital of Rs. 5 Arba by the end of Ashad, as mandated by the Insurance Board.
