May 13: Prime Life Insurance Company, Gurans Life Insurance Company and Union Life Insurance Company have signed an agreement for merger under indirect pressure from the Insurance Board to raise their paid-up capital. 

Chairman of Prime Life Insurance Piyush Raj Aryal, Gurans Life Insurance Company’s Bibek Dugad and Union Life Insurance Company’s Sulabh Agrawal signed the merger agreement on Thursday, amid a formal programme. 

This is the first and largest merger agreement in the life insurance sector. A few days ago, a merger agreement between two non-life insurance companies – Himalayan General Insurance and Everest Insurance Company – took place. 

At present, the three life insurance companies have only agreed in principle to merge. Manoj Kumar Bhattarai, CEO of Prime Life Insurance, said that further process will be taken after getting approval in-principle from the board. “The swap ratio will be decided after the asset liability assessment,” he said. 

He said that this merger will prove to be a milestone in the life insurance sector. Stating that the agreement was  historic, the CEO of Union Life Insurance Manoj Kumar Karn said that it would benefit the overall stakeholders including the insured, promoters and shareholders. 

The three companies do not aim to do integrated business right away. However, they would start the integrated business by completing the merger process as soon as possible. A merger committee will be formed after receiving in-principle approval from the committee. After that, the committee will decide the name of the company, staff management, property valuation and swap ratio. 

The company formed after the merger will have a paid-up capital of Rs 7.13 billion. At present, Prime Life Insurance has a paid-up capital of Rs 2.77 billion, Union Life Insurance has Rs 2.15 billion and Gurans Life Insurance has Rs 2.84 billion. 

The size of the insurance fund will reach over Rs 40 billion after the merger. At present, Prime Life Insurance has an insurance fund of Rs 17.63 billion, Union Life Insurance has an insurance fund of Rs 10.33 billion and Gurans Life Insurance has an insurance fund of Rs 12.6 billion. 

The Insurance Board had issued a directive a month ago instructing the insurance companies to increase their paid-up capital. At present, non-life insurance companies should have a minimum paid-up capital of Rs 1 billion and life insurance companies should have a minimum paid-up capital of Rs 2 billion.  

The board has directed the non-life insurance companies to raise the minimum limit of paid-up capital to Rs 2.5 billion and life insurance companies to increase it to Rs 5 billion by mid-April 2023.