January 8: After the Nepal Insurance Authority (the then Insurance Board Nepal) instructed insurance companies to increase their paid-up capital, almost all the insurance companies opted for merger with each other to meet the paid-up capital requirement.

Surya Life Insurance and Jyoti Life Insurance have started joint operations of their business for the first week of this month. Gurans Life Insurance, Prime Life Insurance and Union Life Insurance have also agreed to merge with each other. Sanima Life Insurance is merging with Reliance Life Insurance. Prabhu Life Insurance and Mahalaxmi Life Insurance have also agreed to merge with each other.

Insurance companies show their bonus rates to their customers (insured) when selling insurance policies. Insurers decide to purchase insurance policy of a company depending on the bonus rate, after weighing beneficial option.

As the process of merger intensifies, insurance companies will now have to compete with each other on bonus rate. At present, the insured are eager to learn about the bonus rate when two or more companies get merged.

To determine the bonus rate, an insurance company must first submit the valuation of its asset and liabilities of each fiscal year. However, this seems to be happening very slowly. 

Nirmal Adhikari, information officer of Nepal Insurance Authority, said that the valuation process has been disrupted due to Covid-19.

“It got a little late when Covid got stuck the world for a year and a half. Slowly everything will become normal," he said.

After reviewing the details submitted by the insurance companies, the authority approves the bonus rate. According to the information officer of the authority, after the merger, they have to complete all the procedures as per the previous provisions and the bonus is determined in the same way.

When insurance companies merge with each other, they maintain their swap ratio. According to Information Officer Adhikari, the bonus rate before the merger does not make sense for the new merged entity.

He said that the combined bonus rate will be determined only in the next year after the merger.