An Overview of Insurance Law in Nepal (2081)

1. Introduction to Insurance Law in Nepal

Insurance law in Nepal is structured around three main categories: life insurance, non-life insurance, and re-insurance. The regulations, set by the Insurance Board, govern each category.

Life insurance covers products such as whole life, endowment, and term life insurance, with the board having the authority to introduce additional categories. Non-life insurance encompasses various risks including fire, motor, marine, engineering, aviation, and miscellaneous insurance. Terms and conditions for both life and non-life insurance policies are regulated by the board. Re-insurance allows insurers to transfer risks to other companies

1.2. Laws and Authorities Governing Insurance Law in Nepal

The Laws Governing Insurance in Nepal are:

  1. Insurance Act, 2079 (2022)
  2. Insurance Regulations, 2079 (2022)

The Authorities governing Insurance in Nepal are:

  1. Nepal Insurance Authority

2. Categorization and Regulation of Insurance Business in Nepal

The Insurance Business in Nepal is structured into three main categories according to Insurance Regulations 2079.

2.1. Life Insurance Business

Insurers are permitted to offer various types of Life Insurance Products such as:

  • Whole Life Insurance
  • Endowment Life Insurance
  • Term Life Insurance

The Board has the authority to introduce additional categories within the life insurance business as deemed necessary. The terms and conditions of life insurance policies are set by the Board.

2.2. Non-Life Insurance

Non-life insurance covers a wide range of risks beyond life-related matters. The categories within non-life insurance are:

  • Fire Insurance
  • Motor Insurance
  • Marine Insurance
  • Engineering and Contractor’s Risk Insurance
  • Aviation Insurance
  • Miscellaneous Insurance

The terms and conditions of non-life insurance policies are also regulated by the Board.

2.3. Re-insurance Business

Re-insurance allows insurers to mitigate their risks by transferring a portion of them to other insurance companies. The specific categories within re-insurance business and any additional arrangements are determined by the Board.

3. Regulatory Framework for Corporate Entities in Insurance Industry

Any national or foreign corporate body intending to engage in Insurance Business must submit an application to the office of the Board. The application should be accompanied by an Insurer registration fee of fifty thousand Rupees.

Upon receiving an application for registration as an Insurer, the Board will conduct necessary inquiries and may seek additional information from the applicant corporate body. Insurers must apply for the renewal of their Certificate of Registration by submitting the prescribed application along with the renewal fee of fifty thousand Rupees.

Failure to renew the Certificate within the specified time limit will result in automatic revocation of recognition. Corporate bodies whose Certificate recognition has been revoked may apply for re-registration as an Insurer.

The Particular Documents necessary to be submitted by the Corporate Body to the Insurer are:

  • The total liability to be assumed by the corporate body in its Insurance Business must not exceed its total assets.
  • For foreign corporate bodies, evidence demonstrating adequate assets within Nepal to cover the liabilities of their Insurance Business in Nepal.
  • Certificate detailing the name, address, and qualifications of the appointed manager responsible for overseeing the Insurance Business.
  • For foreign corporate bodies registered as foreign insurers, a Certificate from the relevant foreign authority authorizing the operation of Insurance Business as per the laws of that country.

4.1. Licensing Procedure and Criteria for Insurance Agents

Individuals meeting the qualifications or corporate bodies with a qualified individual serving as a Director seeking to work as an Insurance Agent must submit an application to the Board along with a recommendation from the concerned Insurer.

Upon receiving an application for an Insurance Agent’s License, the Board will conduct an inquiry to verify the applicant’s qualifications. Approved applicants will be registered in the Registration-book. Following registration, the Board will issue an Insurance Agent’s License specifying the authorized Insurance Business, upon payment of a five hundred Rupees fee.

4.2. Qualifications of an Insurance Agent

  • Minimum educational requirement of passing SLC or equivalent.
  • Completion of the Insurance Agent training program conducted by the Board or a recognized organization.

Insurance Agents must apply for license renewal along with the prescribed fee of two hundred Rupees. Even if an Insurance Agent’s license is canceled due to failure to renew, they shall receive commission for work done before the renewal period.

5.1. Procedure and Requirement for Surveyor Licensure

Individuals or corporate bodies meeting the qualifications  and desiring to work as Surveyors must submit an application to the Board. Upon receiving an application for a Surveyor’s license, the Board will conduct an inquiry to determine the applicant’s qualifications. Following registration, the Board will issue a Surveyor’s license. Surveyors are classified based on their years of experience, ranging from Class “A” to “D”, with corresponding periods of regular work as Surveyors. If a Surveyor’s license is canceled, they will not be eligible for another Surveyor’s license for a period of five years from the date of cancellation.

5.2. Qualification of a Surveyor

  • Minimum ten years of work experience in the Insurance Business at an officer level position in an Insurer’s office.
  • Bachelor’s Degree in Engineering.
  • Bachelor’s Degree in Insurance from a recognized institute.
  • Passed Chartered Accountancy Examination.

6.1. Procedures and Requirements for Broker Licensure

Individuals meeting the qualifications and desiring to work as a Broker must submit an application to the Board. Upon receiving an application for a Broker’s License, the Board will conduct an inquiry to determine the applicant’s qualifications. Approved applicants will be registered as Brokers in the Registration-book.

 Following registration, the Board will issue a Broker’s License, with a fee of twenty-five thousand Rupees. Brokers must apply for license renewal along with the prescribed fee within the specified time limit. The Board will renew licenses upon receipt of the application and fee.

The Board reserves the right to restrict the issuance of Broker’s Licenses based on market studies, research, and evaluations of the Insurance Business market. If a Broker’s License is canceled, the individual will not be eligible for another Broker’s License for a period of five years from the date of cancellation.

6.2. Qualification of a Broker

  • Be recognized as a corporate body under prevailing law.
  • Maintain authorized capital as determined by the Board, with twenty-five percent deposited in a fixed deposit account.
  • The General Manager of the corporate body must have fifteen years of experience in the Insurance Business.
  • Fulfill other conditions as specified by the Board.

7. Conclusion

The Insurance Law of Nepal has provided that Corporate entities intending to engage in insurance business must submit an application to the Insurance Board to seek license for establishing such companies. The board conducts inquiries and may seek additional information before granting registration.

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