Insurance Companies’ Investments in Infrastructure, Agriculture and Tourism Grow 50%

Insurance companies in Nepal are increasingly redirecting their investments from traditional avenues such as fixed deposits and the stock market to infrastructure and other sectors which drive economic growth and create jobs.  

Amendments to investment guidelines in early 2019 have paved the way for the shift in investments to agriculture, energy, and tourism sectors.  

Data from the Insurance Authority show that by the first quarter of the current fiscal year (FY 2024/25), insurance companies had invested Rs 11.24 billion in these areas — a 50 percent increase from Rs 7.51 billion during the same period last fiscal year. Life insurance companies contributed Rs 10.25 billion, while non-life insurance companies accounted for Rs 991.6 million.  

Among the 14 life insurance companies operating in Nepal, eight have ventured into these sectors. National Life Insurance Company leads the pack with an investment of Rs 4.77 billion. Similarly, five of the 14 non-life insurance companies have diversified into production and infrastructure.  

  

The guidelines mandate insurance companies to allocate at least 40 percent of total technical reserves to commercial bank deposits, with an option to invest up to 40 percent in fixed deposits of infrastructure development banks. Investments are capped at 20 percent for development banks, 10 percent for finance companies, 5 percent for government bonds, and 10 percent for ordinary shares of listed companies.  

Additionally, up to 20 percent can be invested in preference shares and debentures of listed companies, as well as sectors like infrastructure, agriculture, and tourism. Real estate, Citizens' Investment Trust, and mutual funds are capped at 5 percent. Investments in tourism, airlines, and agriculture require prior approval from the Nepal Insurance Authority, supported by feasibility studies and business plans.  

As of mid-October 2024, life insurance companies had invested Rs 677.59 billion, while non-life insurance companies had invested Rs 67.34 billion. Over 60 percent of these investments remain concentrated in fixed deposits with banks and financial institutions.  

Poshak Raj Poudel, president of the Life Insurance Association of Nepal, highlighted the gradual diversification of portfolios. He noted that while companies are cautiously exploring sectors like health, education, tourism, and agriculture, thorough risk analysis is necessary as these areas are relatively new for the industry.  

(This news has been updated.)