स्वदेशमै शतप्रतिशत पुनर्बीमा अनिवार्य गरेपछि जीवन बीमक असन्तुष्टLife Insurance Companies Unhappy with Mandatory Domestic Reinsurance Policy

Kathmandu — Life insurance companies have expressed dissatisfaction after the Nepal Insurance Authority (NIA) introduced a policy requiring 100 percent domestic reinsurance for life insurance and several other insurance categories. Insurers argue that the decision contradicts the fundamental principles of insurance by concentrating risk within a single geography, potentially increasing systemic vulnerability.

The NIA recently issued the Insurers’ Reinsurance Directive–2080, making it mandatory for life insurance, motor insurance, agriculture, livestock and herbal insurance, riot and terrorism insurance, and other miscellaneous insurance to be reinsured entirely through domestic reinsurance companies.
According to Clause 8 of the directive, domestic reinsurers are also prohibited from rejecting any reinsurance business received under this arrangement.

Although the Authority has instructed all life insurance companies to immediately comply with the directive, insurers have raised serious concerns. They warn that concentrating all risks within Nepal could create severe difficulties in claim settlements during large-scale disasters such as pandemics, earthquakes, or other catastrophic events.

Risk Diversification Is the Core of Insurance

The Life Insurers’ Association states that insurance is fundamentally a mechanism of risk distribution. Policyholders transfer risk to insurance companies, which then retain part of that risk based on capacity and transfer the remainder to reinsurance companies. Reinsurers, in turn, further distribute excess risk to other global reinsurers through a process known as retrocession.

“Distributing risk across multiple layers and across different countries is the very foundation of insurance,” the association noted. “Confining all risk to a single country undermines this principle.”

The association has repeatedly urged the Authority, through its quarterly reports, to review and revise the provision. It argues that failure to diversify risks geographically could make claim payments extremely challenging during major catastrophes.

Experts Question the Policy

Former Nepal Reinsurance Company chairman and insurance expert Dr. Rabindra Ghimire criticized the directive, calling it fundamentally flawed.

“A regulator cannot force insurers to reinsure only in a specific company or location,” he said. “Insurers should be given the freedom to decide reinsurance arrangements based on proper risk assessment.”

The Life Insurers’ Association has proposed a hybrid model, suggesting that a portion of risk be mandatorily placed with domestic reinsurers while allowing the remaining risk to be diversified among international reinsurance companies.
“Supporting domestic reinsurers is reasonable, but concentrating 100 percent of risk domestically is not practical,” an association member said.

Authority Defends Its Position

Former Executive Director of the Insurance Authority Rajuraman Poudel, however, believes that full domestic reinsurance in life insurance does not pose significant risks.

“Reinsurance companies already transfer catastrophic risks through retrocession to foreign markets,” he said. “Therefore, domestic reinsurance should not create major problems.”

Life insurers dispute this claim, arguing that even catastrophe risks are being retained within Nepal, increasing exposure in the event of large-scale disasters.

Allegations of Policy Bias

The policy was implemented during the tenure of former NIA chairman Suryaprasad Silwal. Sources allege that the directive was designed to benefit Himalayan Reinsurance Company, established under the leadership of the Shankar Group.

According to sources, before Himalayan Reinsurance entered the market, there was no mandatory requirement for insurers to place all reinsurance domestically. While some companies voluntarily reinsured with Nepal Reinsurance Company, compulsory domestic reinsurance was introduced only after Silwal assumed leadership of the Authority.

Responding to the controversy, NIA Executive Director Sushil Dev Subedi stated that he was not aware of the allegations surrounding the policy’s intent.