The country is soon going to get a reinsurance company.
After the Cabinet today permitted Insurance Pool to convert into a reinsurance company, the pool will start the legal process to convert itself into a reinsurance company.
The government move is expected to save billions annually that the domestic insurers have been paying foreign reinsurance companies.
The Finance Ministry has also prepared memorandum of article and articles of association for the reinsurance company, according to the pool that was established in 2003 with government’s 50 per cent stake, and remaining from the insurance companies. The pool currently has Rs 2.10 billion. But the issued and authorised capital of the planned reinsurance company would be Rs 3 billion and Rs 5 billion, respectively. The life insurance companies will take share of around Rs 900 million that the pool has shortfall, as the pool currently has non-life insurance companies as its shareholders.
The Insurance Pool was planned during the insurgency and it covers some 45 per cent of the risk related to terrorism. But the end of Maoist insurgency has made the pool redundant.
However, the Insurance Board (IB) will have to prepare a directive to form the company. Most of the domestic insurance companies have been going to India, Malaysia, Singapore and some African countries for the reinsurance.