KATHMANDU, Sept 4: Insurance companies can now invest up to five percent of their total investment amount in their subsidiaries.
Enforcing the ‘Insurers’ Investment Related Directives 2025,’ the Nepal Insurance Authority (NIA) has come up with the rules for organisations related to life insurance, non-life insurance and reinsurance companies. The provision is applicable if the subsidiary is related to agricultural production, storage and distribution, cold storage, energy generation and distribution, education and health and investment companies.
The regulator however has barred the insurers from investing in the organizations run by families of the board members. Likewise, the insurers cannot invest on the securities and credit instruments issued by the subsidiary companies.
NIA allows insurance companies to buy up to 15 percent shares o...
The insurance companies need to set up an ‘investment management unit’ to look after their investment portfolio. The unit must be led by high-level officials of the insurance company along with technically-sound manpower.
Similarly, the insurers need to manage adequate funds to settle their liabilities that could be borne against the insurance claims, while investing in the specified sectors. “The life insurers need to maintain respective funds along with managing separate mechanisms to look after the income generated from premiums and other sources,” reads the directives.
The NIA has expanded the threshold for insurers to invest in government bonds. As per the new provision, insurers can inject up to 35 percent of their investment in bonds, up from 25 percent earlier. Insurers are also allowed to invest in term deposits of commercial or infrastructure banks.
To increase participation of insurance companies in the secondary market, the NIA has increased the limit for insurers to invest in ordinary shares of listed companies to 15 percent from 10 percent. However, insurers have been barred from investing more than 15 percent of their paid-up capital. Insurers can invest a maximum of 5 percent in Citizen Investment Trust and mutual funds, while they can invest a maximum of 10 percent in real estate businesses.
The insurers need to submit details of the investment within seven days of every quarter end to the NIA.
Meanwhile, the NIA has asked the insurance companies to take permission in advance from the authority while paying in foreign exchange for the services received from abroad. The rule is applicable regarding the payment for reinsurance, retrocession and consultancy fees paid abroad.
