Nepal Insurance Authority Broadens Investment Horizons: Allows Insurance Companies to Invest Up to 15% in Single Public Company Shares

The Nepal Insurance Authority (NIA) has revised its investment guidelines for insurance companies. The new guidelines allow for a significant increase in the percentage of insurance funds that can be invested in shares.

Under the revised guidelines, insurance companies, including reinsurance, non-life, life insurance, and micro-insurance companies, can now extend their stake to 15 percent in shares of a single public company listed on the Nepal Stock Exchange Ltd (NEPSE), an increase from the previous 5 percent. However, it is crucial to note that the total investment in shares remains capped at 10 percent of the investable fund.

Rajuraman Poudel, the spokesperson of the Nepal Insurance Authority, highlighted that the revisions were made to encourage a broader range of investments and to facilitate diversification, thereby potentially increasing returns for insurance companies.

Moreover, the scope of permissible investments has expanded to include private equity and venture capital funds. This move opens up new avenues for life, non-life, micro-life, micro-non-life, and reinsurance companies to explore alternative investment options.

The Nepal Insurance Authority issued several amendments, including the Investment of Life Insurers (Second Amendment), Investment of Non-Life Insurers (First Amendment) Directions, Investment of Micro Life Insurers (First Amendment), Investment of Micro Non-Life Insurers (First Amendment), and Investment of Reinsurers (First Amendment) Directions, all in 2080.

According to the revised guidelines, insurance companies can invest in private equity funds and venture capital funds approved by the Securities Board, adhering to the Specialized Investment Fund Regulations. The allocation for such investments is capped at 1.5 percent of the total investment, with a further restriction of up to 1 percent in a single fund.

The board of directors of the Nepal Insurance Authority enacted these changes by amending the investment directive on the 5th of Poush. The adjustments are anticipated to stimulate increased participation in the securities market and provide insurance companies with additional tools to manage and grow their investment portfolios.

Click here to access the directives published by the Nepal Insurance Authority.