The insurance regulatory body of Nepal is facing difficulties in eliminating cross-holdings in insurance companies, even seven months after the legal deadline for compliance expired.
Despite the Insurance Act mandating the removal of cross-holdings — where a person or entity holds shares in multiple insurance firms — the regulator has failed to implement the provision. Chairperson of the Nepal Insurance Authority (NIA), Sharad Ojha, acknowledged that identifying such cases has proven challenging.
“The deadline set by the Insurance Act to eliminate cross-holdings has already passed,” Ojha said while unveiling the Authority’s Annual Insurance Policy and Programme on Tuesday. “We’ve had delays due to challenges in identifying legal entities involved, but it will now be given priority.”
Ojha noted that it remains difficult to determine whether a single individual or institution holds more than one percent stake in two or more insurance companies.
Section 25(3) of the Insurance Act, 2022 prohibits any single family from holding more than 15 percent of the paid-up capital of an insurance company. Section 25(5) further bars an individual, institution, or related party from owning more than one percent in two or more insurance companies.
The Act had allowed a two-year window for companies to adjust their ownership structure, which expired in mid-October 2024. However, the provision remains largely unimplemented.
The Office of the Auditor General has also raised concerns about continued cross-holding in the founder shares of insurance companies, warning of potential conflict of interest. It has advised the NIA to instruct companies to bring their ownership structures within the legally mandated limits.
Before the Act was enacted, the former Insurance Board had issued directives through the “Directive on Insurer Registration and Insurance Business Operations,” limiting any investor or family members to a maximum of 15 percent shareholding in one company. It also prohibited investors with 15 percent stakes in one insurance company from holding more than one percent in another company of the same category. However, these provisions were never enforced before being replaced by the new Act, and the NIA has since shown little urgency in implementation.
Mandatory Microinsurance Provision to Be Reviewed
Chairperson Ojha also announced that the NIA will revise its microinsurance directive in the upcoming fiscal year. With dedicated microinsurance companies already licensed, the existing requirement mandating all traditional insurers to allocate 10 percent of their business to microinsurance will be reconsidered.
The NIA said it released the Annual Insurance Policy and Programme for the first time with the aim of developing a competitive and trustworthy insurance sector while enhancing institutional governance.
The policy prioritizes protecting policyholders' interests, expanding access to insurance, promoting financial stability through risk transfer mechanisms, and addressing risks posed by climate change and natural disasters. It also emphasizes policy development based on international best practices and research, alongside the integration of information technology and digitalization.
For the fiscal year 2025/26, the policy outlines plans to improve accessibility to insurance services through digital payment and alternative distribution systems, develop tools to provide clear information on insurance policies and benefits, implement a “transparency dashboard” for insurers, and introduce legal provisions to protect the rights of policyholders.
