June 27: Surya Life Insurance Company and Jyoti Life Insurance Company are all set to merge in line with the directive issued by the Insurance Board of Nepal.

On Sunday, the two companies reached a preliminary understanding for the merger

The chairman of Surya Life Insurance Company Keshav Prasad Bhattarai and chairman of Jyoti Life Insurance Company Nanda Kishore Sharma signed a preliminary merger agreement on behalf of their respective company.

However, this is only a preliminary agreement and further process will be taken forward after getting the in-principle approval from the Insurance Board. The swap ratio will be decided after the Asset and Liability Assessment based on Due Diligence Audit (DDA). The companies have also agreed not to lay off the employees after the merger. The name of the company, chairman and CEO to be appointed after the merger will be agreed upon in the upcoming days.

If merged, the company's paid-up capital will reach Rs 4.97 billion. At present, Surya Life Insurance Company’s paid-up capital is Rs 2.55 billion and Jyoti Life Insurance Company’s paid-up capital is Rs 2.42 billion.

Meanwhile, the new entity’s life insurance fund will reach Rs 19.177 billion. At present, Surya Life Insurance Company has a life insurance fund of Rs 13.35 billion and Jyoti Life Insurance Company has a life insurance fund of Rs 5.66 billion. Also, their reserve fund will reach Rs 1.16 billion. At present, Surya Life Insurance Company has a reserve fund of Rs 594.6 million and Jyoti Life Insurance Company has a reserve fund of Rs 566.8 million.

Prior to this merger process, Prime Life Insurance Company, Gurans Life Insurance Company and Union Life Insurance Company had agreed for a preliminary merger agreement.

Everest Insurance Company and Himalayan General Insurance Company as well are merging among the non-life insurance companies. These companies have already received final approval from the Insurance Board and they will be conducting integrated business under the name of Himalayan Everest Insurance Limited from July 17.

The Insurance Board is pushing for merger by introducing policies to increase the paid-up capital of insurance companies. There is also a policy of giving tax concessions if a preliminary agreement on merger is reached by mid-July. As a result, insurance companies are opting for the merger.