Third quarter of FY 2075/76 approaching its end; All 22 listed Insurance Companies yet to convene AGM of FY 2074/75

The pillars of corporate governance are accountability, transparency, responsibility and fairness. The need for corporate governance is even higher in Companies because the company is managed by managers, while the owners (Shareholders) have no active participation in the day to day activities.

Therefore, to ensure the owners get a full picture of how the company is doing, it is mandated by law to organize Annual General Meeting (AGM) every year within six months of completion of the fiscal year. However, in case of the Insurance Industry of Nepal, this has gone way too far.

The third quarter of FY 2075/76 is about to come to an end, but the companies haven’t even conducted the AGM for last FY 2074/75.  None of the companies except Nepal Life Insurance, also haven’t endorsed dividend for the last FY.

In case of Rastriya Beema Company (RBCL), the last AGM had taken place on FY 2063/64 and a dividend of 114.27% was distributed from the profit of FY 2062/63. The table below shows the AGM and Dividend status of Life and Non-life Insurance companies for FY 2073/74 and 2074/75.

There are 19 life and 20 non-life insurance companies in total that are licensed by Beema Samiti. From 19 life insurance companies, 10 are new, 2 companies are old but not listed in NEPSE and the 7 companies mentioned above are listed in NEPSE and publicly traded. Similarly, in case of non-life insurance companies, 15 companies mentioned above are listed and publicly traded, 2 old companies are unlisted and the remaining 3 are newly licensed by Beema Samiti.

In order to understand the situation better, Sharesansar contacted Beema Samiti. Upon enquiry with Beema Samiti, the regulatory body of Insurance sector of Nepal, they informed us that there are two reasons behind this. The first is regarding the minimum capital requirement. The minimum capital requirement was raised for both life and non-life insurance companies and the deadline to meet it had been set by the end of Ashad 2075. However, many companies are yet to meet the capital mark.

Capital plan of Life insurance companies.

Capital plan of Non-life insurance companies.

Therefore, as many companies are yet to meet the capital requirement, they are facing delay in organizing the AGM.

Similarly, the other reason as stated by Beema Samiti was the delay in Actuary Valuation in case of Life Insurance Companies and Liability Adequacy Test in case of Non-life Insurance Companies.

The companies are liable to pay penalties as mandated by the Company Act. However, they should take responsibility and take adequate measures to avoid such delays as it directly affects the public trust.