HIMALAYAN NEWS SERVICE
KATHMANDU: After 18 years of delay since the process started, the government owned Rastriya Beema Sansthan is, finally, headed towards splitting its life and non-life insurance business for real this time.
Rastriya Beema Sansthan (RBS) will become two separate entities before the end of the current fiscal year as per the Rastriya Beema Sansthan Act 1967 revision undertaken in 1995. The revised
version of the Act had authorised RBS to undertake only life insurance business, which made splitting of the company’s life and non-life insurance businesses
a necessary step. Moreover, the Insurance Act 1992 also forbids any company to run both life and non-life insurance businesses.
“We have already undertaken the final steps for the split and have submitted the prospectus for the new non-life insurance company to Finance Ministry along with proposal for procedures to be followed for the split along with distribution of assets and liabilities and employee management,” pointed out RBS administrator Ram Bahadur Khadka.
The Finance Ministry after holding consultations with the insurance regulator and other experts is ready to submit the proposal to be approved by the Cabinet within next week.
“Once the Cabinet approves the prospectus and the procedures we will start the final process which will take about three to five months to conclude,” he informed. The new non-life insurance company will need to be registered at the Office of Company Registrar and will also require an operating licence from the Insurance Board.
After the split, RBS will only issue life insurance policies while the new company will handle non-life policies.
At present, to expedite the split, RBS is undertaking the audit of its accounts from fiscal year 2006-07 till 2012-13. According to Khadka, the company had been maintaining two separate ledgers for life and non-life businesses, so the delay in audit will not hinder the demerger.
According to Khadka, if everything goes as planned, the non-life company will have paid up capital of Rs 350 million.
“The paid up capital of the non-life entity stands at Rs 230 million and with the capitalised dividend till now will add another Rs 120 million, according to our preliminary assessments,” he said. The non-life insurance company needs to have Rs 250 million paid up capital.
The capital structure of the non-life company will have 42 per cent government share, 20 per cent Employees Provident Fund’s stake, eight per cent Nepal Bank Ltd’s stake and remaining 30 per cent will be issued to the public. The public already has 12 per cent stake in the existing company’s non life business.
“In a similar manner, the life insurance company’s paid up capital that is at Rs 130 million by the last audit can be easily increased to Rs 500 million by capitalising on the dividend,” Khadka added.
He also assured that the four employees’ unions at the insurance company do not have any objection regarding the split.
Earlier, the unions had obstructed the operation of RBS for
a fortnight in September demanding different perks and shares in the non-life company for all employees.