Life insurance cos to have shares in reinsurance co

KATHMANDU, AUG 29 - The Insurance Pool, which is being converted into a reinsurance company, will also have the involvement of life-insurance companies as shareholders after the transformation. The existing shareholders of the pool include the government and 17 non-life insurance companies. The memorandum of association prepared for the establishment of the company has adopted a provision for involving life insurance companies as minority shareholders in the company. The Insurance Pool was established a decade ago to give reinsurance coverage to damages by terrorist activities after foreign-based reinsurance companies denied to give risk coverage to such damages. “While the existing shareholders will have 50 percent stake in the new company, 20 percent will be offered to life-insurance companies and institutions such as Employees Provident Fund and Citizens Investment Trust and the rest 30 percent will be offered to the public,” said Ramesh Lamsal, chief executive officer of the pool.
He said the pool has informally notified life insurance companies and other institutions about the plan and has yet to hold formal talks. However, the existing shareholders will initially have 100 percent stake in the proposed company whose initial paid-up capital will be Rs 1 billion. Its issued capital and authorised capital have been proposed at Rs 3 billion and Rs 5 billion, respectively. The pool plans to involve life insurance companies and other institutions and the public while increasing the paid-up capital to the level of the issued capital. As per the latest audit of the pool’s transactions, it has funds worth Rs 1.35 billion. “Rs 350 million will be kept in reserve and Rs 1 billion will be converted into paid-up capital,” said Lamsal.

Although a taskforce headed by Bishnu Lamsal, then joint secretary at the Finance Ministry, suggested bringing in foreign investors, the memorandum of association does not talk about any such plans. The taskforce had also advised the government to allow foreign investors, particularly international insurance companies and brokers, to hold a 25 percent stake in the new company. The involvement of foreign strategic partner was suggested in order to ensure the transfer of expertise into the country as the company would be the first of its kind here. “First, we will convert the pool into a reinsurance company and initiate dialogue for the possible entry of foreign investors,” said Lamsal. “The memorandum of article can be amended through the annual general meeting.”

According to Lamsal, preparations are underway to get the plan approved within mid-September. “We will send the memorandum of association to the finance ministry for approval within one or one and half week, which will be then be sent to the Cabinet for approval,” said Lamsal. He said if things go as planned, the country will get its first reinsurance company around Dashain.

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