July 15: The insurance sector of Nepal witnessed two preliminary agreements for merger in a single day. A preliminary merger agreement was reached between Sanima Life Insruance Company and Reliance Life Insurance Company in the life insurance category while Sanima General Insurance Company reached an understanding with General Insurance Company for merger in the non-life insurance category.
Director of Sanima Life Insurance Company Ghanashyam Thapa and director of Reliance Life Insurance Company Bharat Kumar Todi signed the agreement on behalf of their respective companies.
The two companies will decide on the name of the merged entity, staff adjustment, and other issues after getting in-principle approval from the Insurance Board. The swap ratio will be decided after the Asset and Liability Assessment. After the merger, the paid-up capital will reach Rs 4.18 billion. At present, Sanima Life Insurance Company has a paid-up capital of Rs 2.8 billion and Reliance Life Insurance has a paid-up capital of Rs 2.10 billion.
The size of the life insurance fund of the merged entity will reach Rs 6.80 billion. At present, Sanima Life Insurance Company has a life insurance fund of Rs 3.13 billion and Reliance Life Insurance has a life insurance fund of Rs 3.67 billion.
Meanwhile, Sanima General Insurance and General Insurance Company have also agreed tp take a final decision after the assessment.
The two companies have agreed to conduct integrated transaction under the name of GIC Insurance.
The MoU was signed by Chairman of Sanima General Insurance Company Khemraj Lamichhane and Chairman of General Insurance Company Kunal Kayal. Kayal will be the chairman of the company after the merger. It has been agreed that Sudyumna Upadhyaya will be the Chief Executive Officer (CEO). After the merger, the company's paid-up capital will reach Rs 2 billion.
The Insurance Board has been indirectly pressuring for merger by issuing instructions to increase paid-up capital. The Finance Act provides for tax exemption if the merger is agreed upon within mid-July. The insurance companies have agreed to merge to get the discount. So far, there have been six merger agreements in insurance sector.
Earlier, a preliminary merger agreement had been signed between Himalayan General Insurance and Everest Insurance as well as Siddhartha Insurance and Premier Insurance. Himalayan General and Everest will be conducting integrated business under the name of Himalayan Everest Insurance since next Sunday. Prime Life, Gurans Life, and Union are merging in the life insurance category. Surya Life and Jyoti Life have also agreed to merge.