Financial Catastrophe for Insurers

Nepal’s non-life insurance industry is facing its most turbulent period in decades. Already weakened by shrinking profits and mounting disaster-related claims, the industry has now been rocked by an unprecedented financial shock. The Gen Z protests of September 8 and 9 not only scarred Kathmandu’s streets but also left insurers facing the largest claims payout in the nation’s history—far exceeding the previous crises and exposing deep vulnerabilities in the country’s reinsurance model.

 

In the last fiscal year alone, non-life insurers saw net profits plunge 29%, battered by falling deposit interest rates, and soaring claims from floods and landslides. Those pressures pale in comparison to the aftermath of the protests. Within two weeks, 2,988 claims worth Rs 23.39 billion had been filed across 14 non-life insurers and four micro-insurance firms. By both volume and value, this dwarfs every previous single-event loss in the nation’s insurance history.

 

For context, the 2015 earthquakes generated Rs 16.5 billion in claims, while COVID-19 pandemic policies triggered Rs 16 billion. The September 2024 floods and landslides brought claims totaling Rs 12.27 billion. The Gen Z protests have already eclipsed them all.

 

“This is the largest claims event Nepal has ever faced,” said Nepal Insurance Authority (NIA) Executive Director Sushil Dev Subedi. “The destruction of insured assets on such a scale has never before been recorded.”

 

What unfolded over just two days was not only political turmoil but also an economic catastrophe. Buildings, businesses and infrastructure were left in ruins—each loss translating into a fresh claim. The once-glittering Hilton Hotel in central Kathmandu now stands as a charred shell, its glass façade blackened by fire. Bhat-Bhateni Supermarket, a symbol of consumer affluence, saw 12 of its outlets gutted, inventories worth billions reduced to ash. Thapathali’s automobile hub witnessed rows of shiny new from Hyundai, Suzuki and Tata reduced to twisted metal, while factories belonging to Chaudhary Group, Nepal’s largest industrial conglomerate, suffered heavy damage. Unlike in past unrest, most of these assets were fully insured. This magnifies the financial toll on insurers and cementing the protests as the costliest insured event in Nepal’s history.

 

Biggest Claims in Play

 

Siddhartha Premier Insurance is among the hardest hit, with 307 claims totaling Rs 5.45 billion. The Nepal branch of India’s Oriental Insurance Company faces 86 claims worth Rs 5.23 billion, including one of the largest single losses: the Hilton Hotel fire. By comparison, no individual insurer during the 2015 earthquake or the pandemic bore such concentrated liabilities. The clustering of high-value corporate assets in Kathmandu has left a handful of firms disproportionately exposed.

 

 

The scale and distribution of the claims reveal both the concentration of economic assets in Nepal and the diversity of risks covered. Of the 2,988 claims filed so far, property insurance accounted for the largest share in monetary terms, with 594 claims totaling Rs 18.03 billion. Motor insurance, while representing the majority in claim numbers with 2,209 cases, amounted to a total payout of Rs 3.65 billion. Engineering and contractor risks generated 144 claims worth Rs 0.34 billion, while transport insurance accounted for 11 claims totaling Rs 0.015 billion. The remaining 30 claims, classified as other insurance, collectively added up to Rs 0.34 billion. Taken together, these figures underscore the sheer scale of liabilities now confronting Nepal’s non-life insurers, with total claims already reaching Rs 23.39 billion.

 

Bagmati Province, the country’s commercial heart, absorbed nearly 77 percent of the total claim value, with 1,608 claims amounting to Rs 18.04 billion. Koshi Province followed with 377 claims worth Rs 2.02 billion, while Madhesh Province recorded 323 claims totaling Rs 0.65 billion. Gandaki Province registered 219 claims worth Rs 1.79 billion, and Lumbini saw 254 claims totaling Rs 0.52 billion. In contrast, Karnali and Sudurpaschim Provinces recorded relatively minor losses—25 and 182 claims worth Rs 0.08 billion and Rs 0.25 billion, respectively.

 

These numbers reveal two key patterns. First, while most claims originated from densely populated urban centers, reflecting high-value commercial and property assets, the impact of the unrest extended nationwide. From Kathmandu’s corporate offices to towns in Koshi and Madhesh, businesses and individuals alike felt the disruption. Second, the concentration of high-value claims in Bagmati Province alone—nearly 77% of total claim value—has placed disproportionate pressure on insurers, particularly those with large corporate portfolios.

 

Domestic Reinsurance Under Strain

 

The surge in claims has thrust Nepal Reinsurance Company (Nepal Re) into the spotlight. Most protest-related losses fall under riot and terrorism coverage—mandatory in property insurance policies but rarely reinsured internationally—leaving domestic insurers and Nepal Re to absorb nearly the entire shock.

 

By regulation, insurers retain 35% of liabilities on policies up to Rs 100 million, ceding the remaining 65 percent to Nepal Re. For larger policies exceeding Rs 100 million, Nepal Re is required to cover the full amount. This arrangement has now concentrated almost Rs 23 billion in liabilities onto a single state-owned company with assets of only Rs 34 billion.

 

 

In principle, Nepal Re is protected by retrocession agreements with global reinsurers such as Hannover Re. But the extent of that coverage remains unclear.

 

Nepal Re CEO Surendra Thapa insists that settlements will proceed smoothly. “We have retroceded part of our liabilities to Hannover Re and other firms. There is no question of defaulting on claims,” he said.

 

Still, analysts warn that the exposure is extraordinary for a company of Nepal Re’s size, and its balance sheet could remain under stress for years.

 

Insurers Push Back Against Panic

 

The magnitude of claims has triggered market speculation about insurer defaults. Industry leaders, however, argue the fears are exaggerated.

 

Nepali non-life insurers collectively hold Rs 30 billion in capital and Rs 20 billion in reserves. With annual profits of Rs 6–7 billion, their combined net worth exceeds Rs 40–45 billion. Even claims of Rs 20–23 billion, they argue, will not destabilize companies of this size, particularly with reinsurance absorbing part of the impact.

 

“At present, panic is fueling speculation rather than facts,” said Birendra Baidawar Chhetri, a senior insurance executive. “If you look at capital, reserves and profits, companies remain solvent. Yes, profitability will fall, but not collapse. Last year, we absorbed two major claim events and profits fell by just 5%. This year, given the extraordinary claims, profits could fall by 15%. That is painful, but not fatal,” he added.

 

Nevertheless, uncertainty has rattled the stock market. Investor stocks are under pressure as shareholders brace for weaker dividends.

 

A Systemic Wake-Up Call

 

The protests have revealed much more than short-term financial losses. They have highlighted fundamental flaws in Nepal’s insurance architecture.

 

First, the overconcentration of risk in Nepal Re has become untenable. While global reinsurers cover natural disasters, riot and terrorism risks remain largely domestic. A single event has shown that no single company can shoulder liabilities of this scale.

 

Second, premiums for riot and underpriced. Insurers kept them artificially low, reflecting political calculations and competitive pressure rather than actuarial reality. That mispricing has now backfired, and premiums are expected to rise sharply.

 

Third, Nepal’s low insurance penetration means most households and small businesses lack coverage. This means losses from disasters translate directly into personal ruin. Ironically, while large businesses will recover thanks to insurance, the majority of ordinary citizens bear the losses alone.

 

 

Finally, regulatory frameworks remain outdated. Rules written for a less volatile Nepal no longer match the risks of a modern, politically dynamic and economically interconnected society.

 

For some in the business community, this crisis could become an opportunity. “The moment could push much-needed reforms,” said a senior banker. “If regulators act decisively, they can modernize reinsurance, rationalize premiums and expand coverage. That would turn a shock into a turning point.”

 

The Road Ahead

 

In the immediate term, insurers face a monumental administrative task. Surveyors are spread across Kathmandu and beyond, assessing damage and verifying claims. Early evaluations suggest final settlements may be around 20% lower than initial filings. Even so, Nepal Re’s liabilities will remain in the tens of billions of rupees.

 

For businesses, timely payouts are crucial to restarting operations. For insurers, the challenge is to settle quickly without crippling their balance sheets. Given the situation, regulators must strike a balance—ensuring rapid settlements to restore trust while preparing reforms to prevent future systemic concentration of risk.

 

“The faster claims are paid, the stronger public trust becomes,” said NIA’s Subedi. “We are ensuring that settlements proceed without delay. Since reinsurance is in place, there is no question of claims going unpaid.”

 

Defining Nepal’s Insurance Future

 

Nepal’s insurance sector weathered earthquakes, floods and pandemics. Each crisis tested resilience and forced incremental reforms. The Gen Z protests, however, mark a watershed: for the first time, political unrest has produced insured losses on a scale greater than natural disasters.

 

The stakes extend beyond insurers’ balance sheets. This moment will determine not only whether companies remain solvent, but also whether insurance itself retains public credibility. If payouts are timely and reforms follow, trust in the system will grow stronger. If not, mistrust may linger, weakening both investment and economic recovery.

 

The months ahead will be decisive. Insurers, reinsurers and regulators alike are under scrutiny. Their collective response will determine whether Nepal emerges with a more resilient financial system or remains vulnerable to the next upheaval.

 

For now, the youth-led uprising has saddled Nepal’s insurers with the costliest claims burden in history. Whether it becomes just a record-breaking liability or a turning point toward systemic reform will define the industry’s future.

 

This report was originally published in October 2025 issue of New Business Age magazine.