Deadline for Life and Non-Life Insurance Companies To Raise Capital To Rs 5 Arba & Rs 2.5 Arba Extended Till Ashad 2080

The rule stating that life insurance companies must have a minimum paid-up capital of Rs. 5 Arba was directed by the Nepal Insurance Authority on the 10th of Chaitra 2078. Non-life insurance companies were also urged by the Insurance Board to raise their paid-up capital to Rs. 2.5 Arba by the end of Chaitra 2079.

However, the authority's decision of refusing to give insurance companies time to raise capital has now changed. The authority that had adopted the decision of not extending the period allowed for insurance companies to boost their capital withdrew from the decision at the last minute, when the deadline to increase the capital had passed.

The deadline to enhance paid-up capital, according to the authority, has been extended as a result of numerous insurance companies' failures to maintain the minimum capital required by the board. The authority has now decided to give insurance companies an additional three months to raise capital. By the end of Ashad, both life and non-life insurance companies must have the required minimum paid-up capital.

The Fiscal Act 2078/79 also exempts the insurance firm from paying capital gains tax, dividend tax, and employee retirement tax if the preliminary merger agreement is completed by the end of the fiscal year. In order to take advantage of this, many insurance companies executed a merger agreement before the deadline of the facility.

Life-Insurance Companies

In the fiscal year 2078/2079 and 2079/2080, nine of the nineteen life insurance companies made the decision to merge in order to raise their paid–up capital, reducing the total number of life insurance companies to fourteen. 

List of life insurance companies that underwent merger/acquisition route to enhance their paid-up capital:

Other Life Insurance Companies:

Note: Though the merger procedure between Prime, Union and Gurans life insurance companies have been completed, the companies are yet to start a joint integrated transaction.

Out of the above 19 life insurance companies, Sun Nepal life, Rastriya Beema, Met Life, Citizen Life and Mahalaxmi life insurance, Reliable Nepal Life and IME Life Insurance companies are not listed on Nepal Stock Exchange. 

NON-LIFE 

Similarly, following the Insurance Board's judgement, the insurance companies have combined several strategies, including pursuing a merger, to meet that standard. There was a total of twenty non-life insurance companies, after the merger of twelve non-life insurance companies, the non-life insurance companies will come down to fourteen.

List of Non-life insurance companies that underwent merger/acquisition route to enhance their paid-up capital:

Other Non- Life Insurance Companies:

Note: The amount mentioned are in Rs. Arba. 

Companies have been unable to raise the required minimum capital, despite going through the merger procedure. So in a conversation with Raju Raman Paudel, the Insurance Authority's spokesperson (executive director) regarding the capital requirement has asserted that the deadline to increase the paid-up capital had been extended by three months, i.e until Ashad 2080.

Additionally, when discussing companies that pursued the merger/acquisition route but were unable to increase the minimum capital necessary by the board, Paudel emphasized that those companies will be given the chance to enhance their capital by issuing the right shares. However, these right shares are dependent on the companies’ audited fourth quarter reports, and the right shares will be issued based on the profits the company has made up to the fourth quarter of FY 2079/80 i.e by Ashad end 2080.