(Published in Rupantaran NRB Employees publication, Jan- 2013)

Development of Nepalese Insurance Industries

Rabindra Ghimire 1
1. Introduction:
History of Nepalese non life insurance is Sixty five years and life insurance is Forty years old. The first
general insurance company named "Nepal Insurance and Transport Company" established in 1947 which is
currently known as Nepal Insurance Company. Rastriya Beema Sansthan is only composite of both life and
non life insurance company which was established in 1968 and started non life insurance business in same
years but started life insurance business from 1972. Now, numbers of insurance company has been reached
to 25 ( 1 composite, 8 life and 16 non life).

Before 1947, large amount of premium was collected by Indian insurance companies for long times. After
establishment of life insurance company by Government of Nepal, Indian companies stopped to collect their
premium and phased out their business in Nepal. Before restoration of multiparty democracy in 1990, there
were only five insurance companies existed whereas, during 17 years period (1991 to 2008), additional 20
insurance companies have been established. Post liberalization period is found fertile for insurance business.
In this article, attempt has been made to explore the growth of insurance business during last Eight years
period.

2. Current Status of Insurance Industries

It is experienced that insurance industries has been gradually expanded its intensity of work vertically and
horizontally. The expansion of insurance market during last two decades is found satisfactory comparing to
the previous four decades growth rate. To measure the growth of insurance activities some parameters are
considered such as: Premium collection, investments, tax revenue to government, number of policies, and
employment generation which is discussed below.

2.1 Premium and Investments:

Premium collection is one of the major task of the insurance company. Insurers invests the accumulated
premium in different sectors. It is long term sources of fund for bankers, government and corporate sectors.
The fund is useful for infrastructure related projects which need fund for long term period. The premium
collection and investments of insurance companies depicts by table 1.
Table 1 : Insurance premium and Investments
FY 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12
Total Premium 5417.7 6210.4 7412.4 8690.6 10920.4 15262.7 17486.1 19700
i) Life Insurance 2724.8 3355.5 4123.5 4838.7 6500 8766 10422.2 11600
ii) Non Life
Insurance 2692.9 2854.9 3288.9 3851.9 4420.4 6496.7 7063.9 8100
Total
Investments 14831.2 18412.1 21845.1 24533 31524.1 35867.5 50223.8 56300
i) Life Insurers 11800.2 15201.1 18397.6 20349.9 26516.2 29939.9 42751.1 47600
ii) Non Life
Insurers 3031 3211 3447.5 4183.1 5007.9 5927.6 7472.7 8700
Source: Annual Report, Insurance Board, 2010/11
2.2 Revenue and tax contribution:
Insurance companies are non banking financial intermediaries that channelized fund from savers to users. In
January 2012, life and non-life insurance companies mobilized total fund of Rs. 67,183.4 million. In FY

1
Lecturer of School of Business, Pokhara University, currently pursuing Ph.D. in Banaras Hindu University, India.
Corresponding address: rabindra.pusob@gmail.com
 2010/11, insurance fees income was reached to Rs 17,486.1 million. In 2009/10, insurers paid Rs. 1671.3
million tax to government. Contribution of insurance to GDP was 5.31 percent, 1.31 percent and 1.41
percent in FY 2009/2010, 2010/2011 and 2011/12. (Economic Survey:2012)

2.3 Nos. of Insurance Policies

Strengths of insurance market is assessed by no. of policies sold by insurers to public. Mainly, insurance is
divided in two categories : life insurance policies and non life insurance policies. Life insurance policies are
generally three types: term, whole and endowment. Similarly, general insurance policies are : fire, marine,
health, auto, engineering risk, burglary etc. Both types of insurance policies have varieties of products. In
2009/10, 718,000 life insurance and 476,000 non life insurance policies were sold. In 2009/10, the share of
life and non life policies was 60% and 40% respectively.

2.4 Life Insurance Policies

Nepalese life insurers have been offering varieties of life insurance products under each policy. All types of
products are sold through agents and agents are supported by staffs of head office and branch offices.
Among 9 life insurers, it is found that National life offers maximum types of products i.e. 15 types and
Gurans life offers minimum types of products i.e. 5 types. Agents play vital role in marketing of insurance
products. Form the observation, among the 9 insurers, Asian life has highest numbers of agents i.e. 25806
and Rastriya Beema Sansthan has lowest numbers of agents i.e. 1014. To manage the marketing activities,
all over the Nepal, all insurers have theirs Regional, Branch and Liaison or Network offices. Asian Life has
highest number of branches ( i.e.114) and Rastriya Beema Sansthan has lowest ( i.e.11) branches. Table 2
shows the details of products, branch and agents.

Table 2: Products, branch and agents of Insurance companies

a) Non life insurance companies
Life Insurers Types of Policies Types of No. of No. of
Product Branc Agents
h
1. Rastriya Beema Sansthan Term, Whole, Endowment 8 11 1014
2. National Life Insurance Term, Whole, Endowment 15 99 8812
3. Nepal Life Insurance Co. Ltd. Term, Whole, Endowment 10 23 21858
4. Met Life ALICO (American Life Insurance Term, Whole, Endowment 9
Co. ) 15 7096
5. Life Insurance Corporation (Nepal) Ltd. Term, Whole, Endowment 9 25 4550
6. Asian Life Insurance Co. Ltd Term, Whole, Endowment 8 114 25806
7. Surya Life Insurance Co. Ltd Term, Whole, Endowment 7 35 4096
8. Gurans Life Insurance Co. Ltd Term, Whole, Endowment 5 23 10583
9. Prime Life Insurance Co. Ltd Term, Whole, Endowment 6 97 3349
Total 442 87164
b) Non life insurance companies
Name of Company Name of Major Products Types of Branch No. of
Product Office Agents
1. Nepal Insurance Co. Ltd Fire, Marine, Engineering, aviation, Miscellaneous 6 15 75
2. The Oriental Insurance Fire, Marine, Engineering, aviation, Miscellaneous,
Co. Ltd industrial, accidental, homeowner, Professional &
Bankers' indemnity, Fidelity 18 10 27
3. Rastriya Beema Sansthan Fire, Auto, Aviation, Marine, Engineering, Medical,
Accident, Cash in Transit, Homeowner, Fidelity, Liability,
Workman Compensation 18 13 56
4. National Insurance Co. Auto, homeowner, accident, Medical, Professional 37 9 23

Development of Nepalese Insurance Industries Rabindra Ghimire Page 2 of 4

 Ltd Indemnity, Livestock, Crop, Industrial Line
5. Himalayan General Aviation, Indemnity, industrial, Engineering, Fidelity,
Insurance Co. Ltd. Fire, Medical, Marine, cash, Auto, Liability, travel 16 7 95
6. United Insurance Marine, Fire, Auto, Fidelity, Indemnity, Burglary
Co.(Nepal) Ltd 7 7 57
7. Premier Insurance Co.( Fire, Auto, Accidental, contractors' all risk, Overseas
Nepal) Ltd medi claim, fidelity, cash in transit, Homeowner, Loss of
profit. 14 8 32
8. Everest Insurance Co . Fire, Marine Auto, Aviation, Engineering, Miscellaneous
Ltd 6 12 71
9. Neco Insurance Ltd. Aviation, Engineering, Fire, Marine, Miscellaneous 43 15 26
10. Sagarmatha Insurance Fire, theft, marine, auto, contractors all risk, cash in
Co. Ltd transit, fidelity, public liability, 22 18 93
11. Alliance Insurance Co. Fire, Indemnity, Medical, Auto, public liability, aircraft,
Ltd. 12 11 44
12. N.B. Insurance Co. Ltd Accident, medical, cash in transit, fidelity, professional
indemnity, contractor's all risk, fire, 20 13 32
13. Prudential Insurance Marine, auto, Medical, Fidelity, Cash insurance,
Co. Ltd homeowner, fire, contractor's all risk, 25 7 43
14. Shikhar Insurance Co. Fire, public liability, cash, contractor's all risk, Medical,
Ltd Marine, Aviation, homeowner 12 11 53
15. Lumbini General Fire, Marine, auto, Engineering, aviation, miscellaneous
Insurance Co. Ltd 6 10 60
16. NLG Insurance Fire, Marine, auto, engineering, accidental, aviation
Company Limited 6 24 306
17. Siddhartha Insurance Fire, marine, Auto, Engineering, Medical, homeowner,
Limited cash in transit, accidental, electronic all risk, 14 13 53
203 1146
Source: Official websites of respective insurers, tabulation by researcher

2.5 Non Life Insurance Policies

There are one and half dozen of non life insurers operating the Similar to life insurers, non life insurers
also have been designed different types of products. Neco insurance companies has been offering 43
products whereas Lumbini, Everest, Nepal and NLG are offering 6 types of products. NLG insurance has
24 branches and 306 agents which is highest numbers among the 17 insurers. United, Himalayan and
Prudential are doing their business through 7 branch offices each. National insurance has lowest numbers
of agents i.e. 23. Positive correlation is found between number of branch office and number of agents
but there is negative correlation between number of policies and number of branch and agents..

2.6 Employment generation

Another contribution of insurance to economy is it creates employment opportunities. Insurers provide
different forms of employment such as: appointing as regular staffs, agents, brokers and surveyors.
According to the information provided by the Insurance Board through its official website, insurance
industries have created employment opportunities about to 3200 persons. About 200 surveyors; 87,000
individual and 39 corporate agents are associated with insurance industries.

3. Conclusion
The growth of Nepalese insurance industries is satisfactory. The contribution of insurance to economy
cannot be undermined since it makes possible national and international trade, industrial and
development activities and mega projects. Before establishment of Nepal insurance company, Indian

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 insurance companies were allowed to conduct collect premium. The flight of capital in term of non life
insurance premium was stopped after 1947 but life insurance premium still had been flight in absence of
life insurance company in Nepal. After establishment of Rastriya Beema Sansthan in 1968 and operating
life insurance business from 1973, large amount of national fund was stopped to running way to foreign
countries in term of premium. Insurance industries plays supportive role for the development of trade
and industries, it saves government fund, shares risk and reduces worry and fear. Insurance encourages
to individual for saving fund for future, reduces tax liability and increases confident to initiate
challenging projects.

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