How is the reinsurance market scenario in Nepal?
In the current year, we are more concentrated on Domestic business and specially the Mandatory Cession rather than treaty. It makes us our total premium earning around three times of the last year. The Government of Nepal with the intention in establishment of this Company is to achieve the Direct Cession from all the Companies operating in the country and this is one of main objectives of the company. Further, our Insurance Regulatory Authority has issued the Directives ‘Reinsurance Business (Management and Operation) Guidelines, 2014’ and which gives a directive “Reinsurance Company may carry on the reinsurance business for accepting Direct Cession for up to 30% at maximum the liability created by insurance policy issued in Nepal through reinsurance arrangement.” On the basis of this directive, the government has imposed mandatory cession of 20% to all the companies operating in Nepal. Following this directive, we need to enhance our capacity to absorb in the line of assumed liability.
Do all Insurance companies need to compulsorily cede business to Nepal Re or it is optional?
Yes, indeed, the government has decided each class of insurance policy except issued by all companies is compulsorily to cede 20% to Nepal Re with effect from 17th July 2018. For the Aviation class of business, we are planning to implement it from 17th July 2019. However, NepalRe has been entered into Aviation from March 2019 as a member of consortium with local cedent companies. In order to enable us to assume this business we are looking for our retro backing support.
Do you have any pools operating in the country?
Nepal Re, the successor of Nepal Insurance Pool (Terrorism Pool) that was formed in 2003 with the aim to support the coverage extended the risks of Riot, Strike, Malicious Damage, and Sabotage & Terrorism under the various policies. In accordance with the decision of the Council of Ministers, it was converted and incorporated to Nepal Re under the Company Act of Nepal in 2014.
Now, at the moment no pools are operating in Nepal. However, we have a plan to run pools like Nat CAT Pool, Aviation Pool etc. However, we are running the reinsurance programme of ‘Agriculture & Livestock’ and ‘Riot Strike Malicious Damage Sabotage & Terrorism Risks’ as a voluntary Pool. All the companies are ceding these accounts to Nepal Re in excess over their retention level.
After the major losses from Earthquake in Nepal, how do you view the Natural Catastrophe preparedness in Nepal?
We are studying for Nat Cat Pool formation. For this Pool we are consulting our local Cedants and seeking their agreement. For recognition from the government and regulatory authority the homework is going on. We are planning to provide technical support from ourselves to local cedent companies to prepare data and develop cat models for their use.
How competitive is pricing of products in Nepal and its effect on Reinsurance Premium?
In many products, there are tariff businesses. However, for the cases of Engineering and Miscellaneous classes, the pricing is found more competitive. Undercutting on tariff rates is a big issue in the US. So profitability on underwriting is being a major problem. However, to avoid these circumstances, we are thinking of establishing benchmark rates. Regulators are also taking some initiatives to establish credibility in the insurance market.
How Insurers and Reinsurers are adopting technology for economy of scale, better customer service etc.
In the cases of higher exposures, which is required to place the reinsurance in the International market, the Insurers have to follow the terms dictated by the reinsurers. For other cases which can be absorbed by their treaties, they utilized their own.
What was your business in the current fiscal and your target for the next year?
2018/19 NRs. 3,830,354,162/- (Actual)
2019/20 NRs. 7,000,000,000/- (Target)
Its total quantity, as we are doing for both life and non-life business.
Do you have any footprint in other countries and any plans of expansion?
Our primary requirement is IPO and enlistment of Stock as well as obtaining the Rating from a reputed rating agency. Then we can think of such strategies. We have already discussed it with the government of Nepal and the regulating authority.
Any other development you would like to share.
The government has already approved for the increase of Capital and the Authorized Capital USD 150 Million. and the Paid Up Capital USD 100 Million. 16% i.e., USD 16 million will be offered to the general public. Again, the domestic market has been growing at double digit for the last five years and it may continue for another five or more years. Our presence is growing at a satisfactory level in the international market too. Regulator is working regularly to bring an insurance market to international practices. Some development pictures are in the market now. So both insurance and reinsurance markets have a bright future in Nepal.
