What are the Different Sectors in Which Reinsurance, Micro Life/Non Life, Life Insurance & Non-Life Insurance Companies Can Invest?

In accordance with the business operations of the insurer, Nepal Insurance Authority has published integrated investment guidelines 2079. Separate integrated instructions have been provided for life insurance companies, non-life insurance companies, reinsurance companies, micro-life insurance companies, and micro-non-life insurance companies in accordance with the authority's Mangsir 20 decision.

The Insurance Authority has established various investment zones for insurance companies to make an investment in different sectors, each with its own restrictions and requirements. In this article, we will look into the sectors that are open to investment by insurers.

The areas, restrictions, and requirements for were laid forth in directives issued by the Nepal Insurance Authority. 

For Reinsurance Companies:

So far, there are 2 reinsurance companies, Nepal Reinsurance Company Limited (NRIC) and Himalayan Reinsurance Company. 

• At least 20 percent of the total investment can be made in savings bonds or the bonds issued by the Government of Nepal, provincial local governments, or Nepal Rastra Bank.
• Investment of at least 30 percent in fixed deposits of 'A' class banks and Infrastructure Bank licensed by Nepal Rastra Bank.
• A maximum of 10% can be invested in fixed deposits held in 'B' category banks and financial institutions licensed by Nepal Rastra Bank.
• Up to 5% can be invested in term deposits held in 'C' category banks and financial institutions.
• 20 percent of investment can be made in the non convertible preference shares, bonds and debentures issued by the A, B, and C class banks and financial institutions governed by the Nepal Rastra Bank.
• 20% can be invested in bonds and debentures of public limited companies listed on the stock exchange (NEPSE) licensed by the Securities Board (SEBON).
• Ordinary shares of public limited companies listed on NEPSE may not be invested to the extent of more than 10% by the insurance companies.
• A maximum of 5 percent of the investment can be invested in the Citizen Investment Trust and in the different schemes of Mutual Funds but it is directed that more than one percent of the total investment cannot be invested in a single scheme.
• A maximum of 10 percent of the total investment can be invested in the real estate business. In addition, there is a provision to evaluate the investment in the real estate business once in three years.
• An investment of up to 10 percent in agricultural production and distribution, cold storage, tourism, industry, hydropower, solar energy, renewable energy projects, cable cars, roads, power transmission lines, education, and health can be done. However, not more than a 5 percent investment can be made in a single project.
• A maximum of 5 percent can be invested in the Public Investment company. 

For Micro Life and Micro Non-Life Insurance Companies

Lately, the authority has been working with micro insurance companies as the first priority. Only last month, the authority granted licenses to 7 new micro insurance companies.

Nepal Insurance Authority had published a notice inviting applications from companies interested in applying for a license to operate a micro-insurance company in Nepal. Likewise, 3 micro life insurance and 4 micro non-life insurance companies had been selected to conduct micro insurance activities in Nepal.

Here is the list of sectors where micro-insurance companies can invest:

• At least 25 percent of the total investment can be made in savings bonds or the bonds issued by the Government of Nepal, provincial local governments, or Nepal Rastra Bank.
• It has been arranged that at least 30 percent of the total investment can be invested in term deposits of 'A' class banks and Infrastructure Development Bank as licensed by NRB.
• Up to 10 percent of investment in fixed deposits held in 'B' category banks and financial institutions licensed by NRB.
• Up to five percent of the total investment can be invested in term deposits kept in 'C' category banks and financial institutions licensed by NRB.
• 30 percent of investment can be made in the non-convertible preference shares, bonds, and debentures issued by the A, B, and C class banks and financial institutions governed by the NRB.
• 20 percent in bonds and debentures of public limited companies listed in the NEPSE licensed by the SEBON.
• Only 10 percent should be invested in ordinary shares of public limited companies listed on the stock exchange licensed by SEBON.
• Up to five percent of the total investment can be invested in the investment schemes of Citizen Investment Trust and Mutual Fund.
• However, micro-insurance companies cannot invest in real estate, agriculture, and infrastructure.

For Life Insurance Companies

Currently, there are a total of 19 life insurance companies in Nepal. Out of which, 7 companies viz Mahalaxmi life, Sun life, Citizen life, Met life, Rastra Beema, Reliable Life, and IME Life insurance companies are not listed in Nepal Stock Exchange (NEPSE). 

Here is the list of sectors where the life insurance companies can invest:

• At least 25 percent of the total investment can be made in savings bonds or the bonds issued by the Government of Nepal, provincial local governments, or Nepal Rastra Bank.
• It has been arranged that at least 30 percent of the total investment can be invested in term deposits of 'A' class banks and Infrastructure Development banks as licensed by NRB.
• Up to 10 percent of investment in fixed deposits held in 'B' category banks and financial institutions licensed by NRB.
• Up to five percent of the total investment can be invested in term deposits kept in 'C' category banks and financial institutions licensed by NRB.
• 30 percent of investment can be made in the non-convertible preference shares, bonds and debentures issued by the A, B, and C class banks and financial institutions governed by the NRB.
• 20 percent in bonds and debentures of public limited companies listed in the NEPSE licensed by the SEBON.
• Only 10 percent should be invested in ordinary shares of public limited companies listed on the stock exchange licensed by SEBON.
• Up to 5 percent of the total investment can be invested in the investment schemes of Citizen Investment Trust and Mutual Fund.
• A maximum of 10 percent of the total investment can be invested in the real estate business.
• An investment of up to 10 percent in agricultural production and distribution, cold storage, tourism, industry, hydropower, solar energy, renewable energy projects, cable cars, roads, power transmission lines, education, and health can be done. However, not more than a 5 percent investment can be made in a single project.
• Up to 5 percent can be invested in the shares of a public investment company.

For Non-Life Insurance Companies

Currently, there are a total of 19 Non-life insurance companies in Nepal. Out of which, 17 companies have issued IPO to the general public. 

Here is the list of sectors where the non-life insurance companies can invest:

• At least 20 percent of the total investment can be made in savings bonds or the bonds issued by the Government of Nepal, provincial local governments, or Nepal Rastra Bank.
• It has been arranged that at least 30 percent of the total investment can be invested in term deposits of 'A' class banks and Infrastructure Development Bank as licensed by NRB.
• Up to 10 percent of investment in fixed deposits held in 'B' category banks and financial institutions licensed by NRB.
• Up to five percent of the total investment can be invested in term deposits kept in 'C' category banks and financial institutions licensed by NRB.
• 20 percent of investment can be made in the non-convertible preference shares, bonds and debentures issued by the A, B, and C class banks and financial institutions governed by the NRB.
• 20 percent in bonds and debentures of public limited companies listed in the NEPSE licensed by the SEBON.
• Only 10 percent should be invested in ordinary shares of public limited companies listed on the stock exchange licensed by SEBON.
• Up to five percent of the total investment can be invested in the investment schemes of Citizen Investment Trust and Mutual Fund.
• A maximum of 10 percent of the total investment can be invested in the real estate business.
• An investment of up to 10 percent in agricultural production and distribution, cold storage, tourism, industry, hydropower, solar energy, renewable energy projects, cable cars, roads, power transmission lines, education, and health can be done. However, not more than a 5 percent investment can be made in a single project.
• Up to 5 percent can be invested in the shares of a public investment company.