Shikhar Insurance Company assigned with ICRANP-IR grade by ICRA Nepal

Fri, May 15, 2020 12:55 PM on Credit Rating, Latest,
Shikhar In...

Shikhar Insurance Company Limited: [ICRANP-IR] A(assigned)11 February 2020 Facility/Instrument Rated Amount (NPR Million)Rating Action(February 2020)Issuer Rating NA [ICRANP-IR] A(assigned)Rating action ICRA Nepal has assigned the issuer rating of [ICRANP-IR] A  (pronounced ICRA NP Issuer  Rating A) to  Shikhar Insurance Company  Limited  (SICL).  Issuers  with  this  rating  are  considered  to  have  adequate  degree  of  safety  regarding  timely servicing  of  financial  obligations.  Such  issuers  carry  low  credit  risk.  The  rating  is  only  an  opinion  on  the  general creditworthiness of the rated entity and not specific to any particular debt instrument. The sign of + (plus) or –(minus) appended to the rating symbols indicate their relative position within the rating categories concerned. Thus, the rating of A is one notch higher than A-.

The assigned  rating factors  in SICL’s adequate track  record  in  the  industry (operating  since  2004) and strong  market positioning.  The rating also takes into consideration SICL’s strong branch network,which,coupled  with an adequate solvency profile and an experienced management team augur well for future business growth. Low penetration of the insurance sector in Nepal also offers growth potential to the players like SICL. The rating also takes into consideration, the company’s adequate reinsurance arrangements, including catastrophic provisions and good profile of the lead reinsurer,  which  provides  comfort  to  its  claims-paying  ability  and  its ability  to  maintain solvency  in  the  event of catastrophic  events  like  the  April  2015  earthquake.The rating also  factors  in  the  economies  of  scale available  to  the company given SICL’s position as the largest player in the industry in terms of GPW in the last two to three years. This,coupled with the improving investment yield on a sizeable investment portfolio,has helped SICL maintain a healthy and progressive profitability profile,even with a moderation in underwriting performance.

However,  the rating remains  constrained  by SICL’s moderation  in  premium  growth  and  its decline  in underwriting profitability over  the  last  two  years,  notwithstanding  a  marginal  improvement  during  Q1 FY 2020.  Moderation  in SICL’s underwriting  performance  stems  from the steady  rise  in the claim’s ratio of  its largest segment i.e. Motor. SICL’s combined  ratio  has  witnessed  a  steady  deterioration  between  FY2016  and  FY 2019 (from  57%  to  80%)because  of  the interim rise in the claim’s ratio(from 47% to 74%). Nonetheless, on account of some corrective measures, the claims ratio has moderated to 68% during Q1 FY 2020 resulting in an improved combined ratio of 64%for the period. The management expense ratio has remained high in the recent period(34% in FY 2019 and 42% in Q1 FY 2020)because of the increase in branch network and rise in associated costs,which coincided with the slowdown in premium growth thereby suppressing the  underwriting  profitability  ratio. The  slowdown  is  likely  to continue  as  the  liquidity  crunch  in the banking  sector  is affecting the creation of fresh insurable assets. At the same time, the industry remains fragmented, thus increasing the competitive intensity for players. Th frequent changes in the operating environment (mainly because of the regulatory changes) also pose a challenge for the players, remaining a rating concern. 


  • Adequate track record, strong market positioningand seasoned management team
  • Adequate reinsurance arrangements
  • Adequate solvency and liquidity
  • Good profitability profile


  • Slowdown  in  premium  growth  and increasing  net  claims  ratio
  • Low penetration of insurance sector, fragmented industry and intense competition
  • Changes in the operating environment because of new regulations
  • High sectoral concentration in motor segment

Company Profile

Established in March 2004, Shikhar Insurance Company Limited (SICL) is the 13th private sector general insurer in Nepal. SICL is a large sized company with ~14% of the market share in terms of the general insurance industry’s gross premium written  in  FY 2019.  As  of  mid-October 2019,  SICL has  been in  operation  with  96  branches  spread  across  the  nation  for procuring business and extending after-sales services.

The paid-up capital and the net worth of the company as of mid-October 2019 was ~NPR 1,057 million and NPR 2,766 million respectively. SICL has a 60:40 promoter-public shareholding ratio. Major shareholders as on mid-July 2019 include Mr. Gaurav Agarwal (12.89%), Buddha Air Pvt. Ltd. (8.03%), Mr. Bikas J.B. Rana (7.32%), Mr. Ang Tshering Sherpa (6.88%), Mr. Shashikant Agrawal (5.69%) and Mr. Kailash Prasad Sirohiya (4.05%),among others.

SICL reported a profit after tax of NPR ~430 million during FY2019 (NPR 399 million in FY2018) over an asset base of NPR 4,669 million as of mid-July 2019 (NPR 4,257 million in mid-July 2018). During Q1 FY2020, SICL reported a profit after tax of ~NPR 92 million.

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