Govt finally decides to split Rastriya Beema Sansthan

KATHMANDU, May 8 :

The government has finally decided to split life and non-life business of Rastriya Beema Sansthan (RBS) - the state-owned insurer.

The meeting of Bills Committee of the Cabinet led by Law Minister Narahari Acharya on Wednesday decided to form Nepal Beema Company (NBC) - a separate public limited company - to handle RBS´s non-life business.

The amendment to the Insurance Act made in 1995 bars insurance companies from doing both life and non-life business. The government had introduced the provision in line with the international practice as life and non-life insurance businesses are of different nature and serve different clients.

Once the new company starts operation, RBS will operate only life insurance business and it will be governed under the law of Rastriya Beema Sanshan.

Though the government had taken initiatives to implement the law in the past, it had failed to split life and non-life business of RBS due to protest from employees´ unions.

Krishna Prasad Devkota, joint secretary at the Ministry of Finance, said RBS employees have supported the government decision to split operations of RBS.

The government, Employees´ Provident Fund and Nepal Bank Limited will have 41 percent, 19 percent and 10 percent shares, respectively, in the new company. The remaining 30 percent would be issued to general public.

Ram Bahadur Khadka, chief administrator of RBS, said the employees had supported the decision to split RBS´s business. The employees had barred Khadka from entering his office last year after he forwarded the proposal to split RBS´s operations to the finance ministry.

Nawaraj Mudhbhari, a leader of employee´s union, welcomed the decision. He also made it clear that the employees were never against the decision of splitting the company.
The cabinet decision allows the employees to choose either RBS or NBC.

Khadka said they have asset of Rs 230 million of non-life businesses and will meet the required Rs 250 million paid up capital (for the new company) by distributing bonus shares to the promoters. According to the Insurance Board, non-life insurance companies should have minimum Rs 250 million paid up capital. RBS has not distributed dividends for over a decade.

However, RBS will have to raise paid-up capital to Rs 500 million as required by the Insurance Board - the insurance sector regulator. At present, it has capital of only about Rs 120 million except bonus and dividends.

There are 16 non-life and eight life insurance companies in the country.

Source: Republica