GIAN Urges Insurance Board to Address Industry Concerns and Reform Key Provisions

The General Insurance Association of Nepal (GIAN) has formally requested the Insurance Board to address several pressing challenges in the insurance regulatory framework. In a press statement dated 2082/03/17, GIAN highlighted key issues including the mandatory distribution of direct cession to domestic reinsurance companies, complications surrounding reserve fund provisions, and the need for industry representation in Nepal Reinsurance Company.

GIAN proposed revisiting the current policy of allocating a mandatory 6% direct cession to each of the two domestic reinsurance companies, totaling 12%. The Association suggested reducing this to 8% (4% each) in the upcoming fiscal year, or alternatively, distributing based on capacity and performance to ensure a fair and competitive environment.

The Association cited Section 81(1)(g) of the Insurance Act 2079, arguing that the existing provision mandating 6% cession from the start contradicts the spirit of the Act. GIAN urged the Board to allow insurers to reinsure only the portion of risk retained after deducting agreed cessions. It also expressed concern that delays in responses from local reinsurers have made it difficult for insurers to issue policies on time, particularly when mandatory domestic cession precedes foreign placements.

Additionally, GIAN called for a reduction in the reserve fund requirement from 50% to 20%, noting the financial pressure it places on companies. The Association also appealed for the inclusion of insurer representatives in the board of Nepal Reinsurance Company to enhance transparency and alignment. GIAN warned that escalating reinsurance fees are placing added strain on policyholders and could negatively impact the reputation of Nepali reinsurers in the international market.