The government has finally decided to split life and non-life business of Rastriya Beema Sansthan (RBS), after a long discussion.
Though the insurance regulator had issued the directive to split life and non-life business long ago, the state-owned insurer had been in dilemma in by-forcating the Beema Sansthan since long, also due to employees protest.
Joint secretary at the Finance Ministry Krishna Prasad Devkota said the employees have supported the government decision to split Beema Sansthan operations.
Chief administrator of Beema Sansthan Ram Bahadur Khadka said that the employees have supported the decision to split business. The employees had last year barred Khadka from entering his office after he forwarded the proposal to split operations to the Finance Ministry.
The meeting of Bills Committee under the Cabinet led by law minister Narahari Acharya today decided to form Nepal Beema Company – a separate public limited company – to handle Beema Sansthan’s non-life business.
The amendment to the Insurance Act made in 1995 bars insurance companies from doing both life and non-life business. The government had introduced the provision in line with the international practice as life and non-life insurance businesses are of different nature and serve different clients.
Once the new company starts operation, Beema Sansthan will operate only life insurance business that will be governed by law of Rastriya Beema Sansthan.
The government, Employees’ Provident Fund and Nepal Bank will have 41 per cent, 19 per cent and 10 per cent stakes, respectively, in the new company, whereas the remaining 30 per cent will be floated to the general public.
Today’s cabinet decision allows the employees to choose either Beema Samiti or the new non-life company.
Khadka said they have asset of Rs 230 million in non-life businesses and will meet the required Rs 250 million paid up capital – according to the regulatory requirement for the new company – after distributing bonus shares to the promoters.
According to the Insurance Board, non-life insurance companies should have minimum Rs 250 million paid up capital.
Beema Sansthan has not distributed dividends for over a decade due to its failure in auditing despite repeated pressure from the government and shareholders.
However, Beema Sanstha will have to raise paid-up capital to Rs 500 million according to the regulatory requirement for life insurance company. Except bonus and dividends, currently, it has Rs 120 million paid up capital only.