July 6: The deadline given by the Nepal Insurance Authority (NIA) to the insurance companies to maintain the minimum paid-up capital ends within a few days. So far, only seven insurance companies have maintained the paid-up capital set by the governing body of the insurance sector.

According to the NIA, rights shares will be issued for the rest of the companies to maintain the minimum paid-up capital. The NIA’s board meeting has already given permission to NLG Insurance to issue 66 percent rights shares.

Nepal Insurance Authority (formerly known as Insurance Board of Nepal) had initially give a one-year time to the companies to raise their paid-up capital. However, since the companies did not meet the prescribed limit during that period, the authority issued the 'Insurance Registration and Insurance Business Operation (Second Amendment) Guideline, 2080' and extended the deadline until the end of the current fiscal year (mid-July) to maintain the prescribed limit of paid-up capital for them.

The authority has fixed the minimum paid-up capital of Rs 5 billion for life insurance companies and Rs 2.5 billion for non-life insurance companies.

Earlier, the paid-up capital of Non-Life Insurance Company was Rs 1 billion, and that of Life insurance companies was Rs 2 billion.

A few days before the deadline set by the authority, three out of 15 life insurance companies in operation in Nepal have maintained the minimum paid-up capital. Towards non-life insurance segment, only four out of 14 companies have maintained the paid-up capital specified by the authority.

According to the authority, a company operating as a branch of a foreign company does not need to increase its capital.

In terms of life insurance, only Nepal Life Insurance Company Limited, Himalayan Life Insurance Company Limited and National Life Insurance Company Limited have maintained the paid-up capital specified by the authority. Nepal Life has maintained a paid-up capital of Rs 8.2 billion, Himalayan Life Rs 8.2 billion and National Life Rs 5.1 billion.

IGI Prudential Insurance Company Limited, Siddharth Premier Insurance Limited, Shikhar Insurance Company Limited and Sagarmatha Lumbini Insurance Company Limited have met the capital specified by the authority towards non-life insurance category. The paid-up capital of IGI Prudential has reached Rs 3.2 billion, Siddharth Premier Rs 2.8 billion, Shikhar Rs 2.65 billion and Sagarmatha Lumbini Rs 2.62 billion.

According to Rajuraman Paudel, spokesperson for the Nepal Insurance Authority, companies that are unable to maintain the minimum paid-up capital have been instructed to issue rights shares and bonus shares to raise their capital. The NIA had given first priority to merger for increasing the capital.

“Now they are giving a chance to maintain the minimum paid-up capital by issuing the rights shares, said Poudel, "Four insurance companies are in the process of issuing IPO at premium rates."

According to Paudel, the authority's board meeting held last Friday decided to allow NLG Insurance to issue 66 percent rights shares. Currently, the paid up capital of NLG Insurance is Rs 1.45 billion. The paid-up capital of the company will reach Rs 2.42 billion after issuing the rights share.