Nepal’s insurance sector will see an addition to the existing number of insurance companies with the state-run insurer readying to register a separate company for its non-life business.
Rastriya Beema Sansthan (RBS) is preparing to apply for the registration of its non-life insurance company under the name Rastriya Beema Company Ltd at the Office of Company Registrar (OCR) by next week.
“We will apply at OCR for the registration of the new company as soon as we get the written approval from the two shareholders — Nepal Bank Ltd and Employees Provident Fund,” informed Administrator of RBS, Ram Bahadur Khadka.
Nepal Bank holds 11 per cent stake in the company’s existing non-life business and 16.7 per cent in life insurance business, while Employees Provident Fund owns 22.25 per cent in non-life business.
The state-run insurer had begun the process to split into separate life and non-life entities more than 18 years ago as per the Rastriya Beema Sansthan Act 1967 revision undertaken in 1995. Moreover, the amended Insurance Act — that governs insurance companies — also forbids any company to operate both life and non-life insurance businesses. The process to split the company according to the regulations had failed to materialise, despite repeated orders from the regulator, finance ministry and even the Cabinet.
This time, RBS began the process after the appointment of Khadka as its new administrator through open competition in early 2013. RBS board had finally submitted the proposal for separating the business to the Ministry of Finance on August 12, 2013. Finally, the Cabinet formed following the November election, approved the RBS split on May 2.
“Despite still being a single company, RBS had been maintaining the business separately for life and non-life part with two balance sheets and different ownership structure,” pointed out Khadka.
“So distribution of assets and liabilities and employee management won’t be complicated in case of the demerger,” he added.
The non-life spin off has decided to be named Rastriya Beema Company because the company wants to retain the brand name associated with it, informed Khadka.
The non-life company will have paid-up capital of Rs 350 million, according to Khadka. At the end of fiscal year 2005-06, the non-life entity’s
paid-up capital stood at Rs 230 million and the company is planning to capitalise on the undistributed dividend to add another Rs 120 million and meet the regulatory paid-up capital requirement of Rs 250 million.
The public has 12 per cent stake in the existing company’s non-life business. “In a similar manner, the remaining life insurance company’s paid-up capital — at Rs 130 million by the last audit — can be easily increased to Rs 500 million by capitalising on the dividend,” informed Khadka.
The state-owned insurer that had not conducted a proper audit of its balance sheets is undertaking an audit of the years between fiscal year 2006-07 and 2012-13. As RBS had not fulfilled the condition of splitting its business, the Insurance Board has not renewed its licence for more than a decade.
source: the himalayan times,21 may 2014
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