November 8: Insurance companies are found to be reluctant to invest in the real estate sector. Nepal Insurance Authority opened the door for insurance companies to invest in the real estate by amending the regulations. But the authority informed that not a single company invested in the real estate sector in the fiscal year 2079/80.

According to the authority, insurance companies have invested more than Rs 650 billion in various sectors. Records of NIA show that insurance companies invested Rs 658.93 billion in fixed deposits, listed public limited companies, bonds, debentures, citizen investment funds, etc in the fiscal year 2079/80.

Life insurance companies have the largest share in the total investment from this sector. The share of life insurance companies in the total investment is 86 percent ie Rs 568.14 billion. The share of non-life insurance company in the total investment is 9 percent ie Rs 58.85 billion. The remaining 5 percent investment is from reinsurance companies. According to the authority, they invested Rs 29.97 billion. Even though micro insurance companies have invested in various sectors, the amount is insignificant.

Insurance companies have been investing in various sectors as per the investment guidelines issued by the authority. It seems that insurance companies do not want to invest in real estate. The authority said that only one insurance company, National Life Insurance Company invested Rs 362.4 million in real estate in the year 2078/79. 

As per the authority, reinsurance, life insurance and non-life insurance companies can invest a maximum of 10 percent of their total investment in the real estate while there is a rule that micro insurance companies cannot invest in real estate.

Former Chairman of the Authority, Chiranjeevi Chapagain assesses that companies are not investing in real estate due to risk. He said, “The price of real estate is high now. Due to this, the risk is also high, so the companies are not willing to invest.” Chapagain said that since the real estate is not a liquid asset, the authority had set limits for insurance companies to invest in this sector during his tenure. He added that there is an international practice of determining the limit of investment in real estate because it cannot be converted into cash immediately.