Non-Life Insurers Profits Plunge due to Gen-Z Movement and Floods

The financial performance of Nepal's non-life insurance companies has taken a severe hit this fiscal year, with nearly half of them reporting losses by the second quarter, primarily due to massive claim payouts following the Gen-Z movement and devastating floods.

According to the unaudited financial statements published up to mid-January, 14 non-life insurance companies posted a collective net loss of Rs 4.1 million. This stands in stark contrast to the same period last year when the companies had together earned a net profit of Rs 1.25 billion.

The losses were triggered by claims exceeding Rs 38 billion related to property damage during the Gen-Z protests in September and the severe floods and landslides in October. The first quarter (mid-July to mid-October) alone saw the sector suffer a staggering loss of Rs 1.95 billion, with 12 companies reporting negative profits.

However, the financial health of most insurers improved significantly by the second quarter. As of mid-January, only IGI Prudential, Siddhartha Premier, United Ajod, Sanima GIC, and Shikhar Insurance remained in the red.

Birendra Chhetri, CEO of Siddhartha Premier Insurance and Chairman of the Nepal Insurers' Association, explained that the recovery was expected. "The claims from the Gen-Z movement and floods were booked in the first quarter itself," he said. "By the second quarter, we began to see a recovery in the financial position of most companies." He anticipates that while annual profits for the sector might drop from the usual Rs 3.5 to Rs 4 billion to around Rs 1 billion this year, the overall financial situation will remain positive.

Data from the Nepal Insurance Authority shows that claims from the Gen-Z movement alone amounted to Rs 23.77 billion, while the floods added another Rs 4.25 billion in claims. As of mid-February, insurance companies had disbursed Rs 5.98 billion for Gen-Z-related claims, which is only 25.15 percent of the total. Nepal Reinsurance Company has provided Rs 2.51 billion in advance payments to help primary insurers manage their cash flow.

Sunil Ballabh Pant, CEO of NLG Insurance, noted that despite the unprecedented volume of claims, the sector managed to recover quickly. "Many companies were in loss in the first quarter, but by the second quarter, only a few remained in negative territory," he said. "While the large claims did create a temporary cash flow challenge, the smooth payouts have actually improved public perception of insurance."

Despite the drop in profits, the non-life insurance sector's business grew by 7.68 percent by mid-January. Insurers attribute the pressure on profits not only to the large claims but also to a decrease in income from investments, driven by falling bank interest rates.