Prudential Insurance backs out of merger

KATHMANDU, NOV 6: 

Prudential Insurance has pulled itself out from the possible merger with Shikhar Insurance and United Insurance. 

“Prudential Insurance has sent a letter to Insurance Board stating that they are formally withdrawing from the merger process with the other two insurance companies,” informed Prof Dr Fatta Bahadur KC, chairman of Insurance Board. Prudential Insurance Company, United Insurance Company and Shikhar Insurance Company had opted for a merger in order to meet the probable increment in paid up capital requirement about six months ago. These three non life insurance companies have formed a committee to conduct feasibility study for merger.

“The remaining two have also not informed the board regarding the development of the merger,” Dr KC added. Shikhar Insurance had opted for merger with two other non-life insurance companies three years ago. Shikhar Insurance, Premier Insurance and Sagarmatha Insurance’s merger process did not take off as the companies failed to agree on major issues. 

The insurance industry is expected to witness few mergers in near future as the regulator will be increasing the paid up capital of the insurance companies. Insurance is amending Insurance Act 1992 for the upward revision of the paid up capital of the insurance companies. 

The draft of amended Insurance Act has increased the paid up capital to Rs 1 billion for non life insurance companies and Rs 2 billion for life insurance companies, in order to maintain that paid up capital the insurance companies will have no other choice but to get merged.

According to the existing regulations, non life insurance companies should have paid up capital of Rs 300 million and life insurance companies have to maintain paid up capital worth Rs 500 million to obtain license to start the insurance business.

At present there are 25 insurance companies in Nepali insurance market. There are 16 non life insurance companies and 8 life insurance companies while Rastriya Beema Sansthan -the government owned insurance company is in both–life and non life insurance sectors.

Source: THT