ICRA Nepal Flags Rising Credit Risks Post Gen Z Protests

Nepal’s economic outlook has become more uncertain following one of the most politically turbulent weeks in recent memory. Nationwide protests by Gen Z, which began on September 8 against the ruling government, escalated quickly and led to a change in government leadership on September 12. While fueled by political grievances—particularly over corruption and restrictions on social media—the unrest caused significant collateral damage, impacting both public infrastructure and private businesses.

In its latest announcement, ICRA Nepal, the country’s leading credit rating agency, has flagged multiple corporate and insurance operators on “Watch with Negative Implications” category, citing heightened operational and financial vulnerabilities.

Insurers Grapple with Heavy Claims

Nepal’s general insurance industry, already facing intense domestic competition, is expected to absorb significant losses from the recent unrest. Much of the physical damage to infrastructure and businesses is insured, shifting substantial risk onto insurers and reinsurers.

ICRA Nepal has revised the outlook for several major insurers and one of the country's leading domestic reinsurer, Nepal Reinsurance Company Limited, placing their ratings on negative watch. Nepal Reinsurance, currently rated [ICRANP-IR] AA-, could face pressure on its financial profile. Private insurers, including Shikhar Insurance Company Limited ([ICRANP-IR] AA-), Sagarmatha Lumbini Insurance Company Limited ([ICRANP-IR] A), Siddhartha Premier Insurance Limited ([ICRANP-IR] A), NLG Insurance Company Limited ([ICRANP-IR] A-), and United Ajod Insurance Limited ([ICRANP-IR] BBB+), were similarly flagged.

“The recent events could significantly affect insurers’ financial profiles through higher claims, delays in premium inflows, and pressure on reinsurance recoveries,” ICRA Nepal said. The long-term impact will largely depend on the speed of claims settlement and the recognition of losses.

Corporate Sector Disruptions

The protests and resulting damages have reverberated across Nepal’s corporate sector, particularly affecting retail and consumer-facing businesses. Companies that depend on physical infrastructure and steady customer traffic have been placed on watch.

Two Chaudhary Group entities—C.G. Impex Pvt. Ltd. and E.O.L. Pvt. Ltd.—now face heightened operational and cash flow risks. Retail giant Bhat-Bhateni Supermarket and Departmental Store Pvt. Ltd., with over Rs 17 billion in rated exposure, had its [ICRANP] LBB+/A4+ rating placed on watch after disruptions at its outlets.

These rating adjustments reflect anticipated drops in income and weakened loan repayment capacity due to physical damage, business interruptions, and reduced customer traffic.

Tourism Faces Indirect Fallout

Nepal’s tourism sector, which contributes nearly 7% to GDP, is facing indirect but significant impacts, with disruptions occurring during the peak tourist season (September–November). Damage to hotels, resorts, cable cars, and aviation-related services has raised concerns of fewer foreign visitors and potential revenue losses.

Key tourism operators, including Kailash Helicopter Services Ltd. and Oriental Hotels Ltd., have had their ratings adjusted to reflect operational and demand uncertainties. ICRA Nepal has placed both companies on “Watch with Negative Implications.”

Chandragiri Hills Ltd., which operates a popular tourist destination near the capital, now has its credit ratings under review with negative implications, meaning lenders are closely monitoring whether the company can manage its Rs 2.1 billion debt. Similarly, Maulakali Cablecar Ltd., a major cable car project in central Nepal, is also considered at higher risk. These concerns stem from potential facility damage, lower visitor numbers, and the possibility that these challenges could make it harder for the companies to generate enough revenue to meet loan obligations.

Outlook

Economists caution that political instability, infrastructure damage, and weak investor sentiment could slow Nepal’s fragile economic recovery. Exposure to large insurance claims may strain liquidity, while disruptions in retail and tourism could dampen employment and consumer spending.

ICRA Nepal emphasized that ratings remain under review and could be revised further as more clarity emerges on insured losses, operational recovery, and government policy responses.

“The resolution of these rating watches will depend on the actual financial impact of recent events, the recovery of operations, and insurers’ ability to absorb losses,” the agency said.

For now, these rating actions signal that Nepal’s corporate and financial sectors face significant headwinds as the country navigates the fallout from recent political upheaval.