Insurance Board mulling over new license to insurance companies; publishes new directive with capital requirement

- ShareSansar, April 9, 2017  on Exclusive , Featured , Latest , Stock Market

With the new directive “Insurer Registration & Insurance Operation Directive 2073”, the Insurance Board (Beema Samiti) has opened way to provide license to new insurance companies. Insurance Board is mulling over to provide license to the companies that have registered before 2064 B.S.

On March 31, 2017, the Insurance Board had directed all insurance companies to increase their paid up capital by four folds. With the new directive, non-life insurance companies have to increase their paid up capital to Rs 1 arba and life insurance companies have to increase their paid up capital to a minimum of Rs 2 arba by the end of FY 2074/75. It had also directed all insurance companies to unveil their capital plan within 3 months.

New insurance companies wishing to obtain the license must fulfill this minimum paid up capital requirement. The new insurance companies must maintain the following share structure requirements:

  1. Minimum of 51% for promoters and minimum of 30% for general public (including 5% for its staffs)
  2. For joint-venture companies, a maximum of 80% can be set aside for foreign partner. However, if less than 50% of capital is from foreign investment, a minimum of 30% stake should be set aside for public

How many companies are in pipeline to obtain license?

As per a source, 13 companies have registered to obtain license for the last 9 years. Established groups like Sanima, IME, Standard, SBI and Mahalaxmi are waiting approval for insurance business license. These new insurance companies must come into operation with the revised capital requirement. The Insurance Board has also made it mandatory to provide share ownership structure, details of fixed assets, management expenses, fundamental strategy for long-term stability and market share and an overall 5-years business plan.

How are existing insurance companies going to meet the capital requirement?

Out of the 22 insurance companies that are in operation, 10 companies are going to increase their capital by the way of right shares or Further Public Offerings (FPO). National Life Insurance (NLICL) and Himalayan General Insurance (HGI) will easily meet their capital requirements after their respective right offers of 100% and 166.67% while Nepal Life Insurance (NLIC) has already reached the minimum capital requirement of Rs 2 arba.

S.N.CompanySymbolPaid Up Capital (in Rs crore)Proposed Capital Increment
1Prime Life Insurance CompanyPLIC48.81
2Gurans Life Insurance CompanyGLICL55.008% bonus share
3Surya Life Insurance CompanySLICL62.505% bonus share
4Asian Life Insurance CompanyALICL80.5550% right share
5Life Insurance Corporation (Nepal)LICN106.9024.80% bonus share
6National Life Insurance CompanyNLICL133.13100% right share
7Nepal Life Insurance CompanyNLIC309.64
S.N.CompanySymbolPaid Up Capital (in Rs crore)Proposed Capital Increment
1Everest Insurance CompanyEIC10.12
2Rastriya Beema CompanyRBCL12.44
3Nepal Insurance CompanyNICL28.76
4United Insurance Company (Nepal)UIC30.24
5NB Insurance CompanyNBIL27100% right share
6Premier Insurance CompanyPIC44.85FPO at Rs 1,004 per share
7Prudential InsurancePICL42.7630% right share
8Siddhartha InsuranceSIL44.8319.23% right share
9NLG InsuranceNLG51.23
10Sagarmatha Insurance CompanySIC53.82FPO at premium price
11Prabhu InsurancePRIN57.75
12Lumbini General InsuranceLGIL39.15100% right share
13Neco InsuranceNIL71.29
14Shikhar Insurance CompanySICL81.76FPO at Rs 1,620 per share
15Himalayan General InsuranceHGI38.52166% right share

Also see: Know the current paid up capital of insurance companies; see how much increment required