Capital Increase for Insurance Companies: The Authority Moves Forward with the Plan

The Insurance Authority had directed life insurance companies to increase their paid-up capital to NPR 5 billion and non-life insurance companies to NPR 2.5 billion by the end of Ashad (mid-July). However, as many companies were unable to meet this target within the stipulated timeframe, the authority has now allowed companies to count reserves and provisions toward paid-up capital.

Life Insurance Companies:

So far, 5 life insurance companies have achieved the NPR 5 billion paid-up capital requirement, while the remaining 7 companies have submitted plans to the authority to raise capital through rights and bonus shares. Life Insurance Corporation has received approval to issue 88% rights shares, after which its capital will reach NPR 5 billion.

Non-Life Insurance Companies:

Five non-life insurance companies have met the NPR 2.5 billion target, while the remaining 7 are preparing to increase capital through rights and bonus shares. Nepal Insurance has applied for approval to issue rights shares at a ratio of 10:4.

Impact of Rights Shares:

Some companies have seen an increase in their share prices after receiving approval from the Securities Board for rights share issuance. However, the authority has cautioned investors to understand the long-term effects of rights shares, as an increase in the number of shares can lead to a decrease in earnings per share.

This move by the Insurance Authority aims to strengthen the capital base of insurance companies.