Half of licensed reinsurance broker companies continue to be in a slumber

KATHMANDU, SEPTEMBER 9: Half of the reinsurance broker companies licensed by the Nepal Insurance Authority have yet to commence operations. Despite receiving approval two years ago, these companies continue to be inactive. 

In 2079 BS (2022 AD), the authority granted operating licenses to 15 reinsurance broker companies simultaneously. These included Trust Insurance Broker, STC Reinsurance Broker, Federal Reinsurance Broker, Hub Reinsurance Broker, Global Insurance and Reinsurance Broker, Alliant Insurance Broker, Shubha Reinsurance Services, Ewan Reinsurance Broker, Allied Insurance Broker, and J.B. Boda Insurance and Reinsurance Broker, among others.

Additionally, companies such as Lord Buddha Reinsurance Broker, Sridhar Insurance Broker, Frost Policy Insurance, Marvel Reinsurance Broker, and Synergy Reinsurance Company were also licensed.

Among the licensed companies, only Ewan Reinsurance Broker, Federal Reinsurance Broker, Hub Reinsurance Broker, STC Reinsurance Broker, Trust Insurance Broker, Allied Insurance Broker, Marvel Reinsurance Broker, and J.B. Boda have established offices and are operational. The remaining companies remain inactive, as confirmed by an official from the authority.

The Insurance Act provides for the establishment of reinsurance broker companies to serve as intermediaries in the insurance industry. In accordance with this provision, the authority issued licenses to 15 companies in one batch. To support their operations, the authority also introduced the Reinsurance Broker Directive in 2078 BS (2021 AD).

As per the directive, reinsurance brokers must be structured as organized entities. They are required to submit quarterly reports to the authority, detailing potential liabilities arising from reinsurance agreements, any changes in the information provided during licensing, details of transactions with insurers and reinsurers, and other relevant data.

Furthermore, the directive grants the authority the right to inspect or investigate the activities of insurance brokers at any time. However, one brokerage head noted that no inspections have been conducted in the two years since the licenses were issued. "Some companies may have obtained the license to hold it rather than to engage in actual business," he stated.

In contrast, officials from the authority claim that the inactivity of these companies is due to the small size of the market. "Nepal’s insurance market size is limited, but the number of broker companies is high. Some may be inactive due to a lack of business opportunities," an official explained. He also noted the absence of legal provisions to revoke the licenses of inactive companies.

According to the directive, reinsurance brokers must have a minimum authorized capital of NPR 100 million, with 50% of this amount maintained as paid-up capital. Additionally, 25% of the authorized capital must be earmarked and placed in a fixed deposit account at a commercial bank. Other capital-related provisions will be determined periodically by the committee. In the case of foreign broker companies, a security deposit of USD 50,000 is required in a class-A commercial bank.