The Insurance Board (IB) has prohibited insurance companies from maintaining cross-holding of shares in two or more than two companies. In a directive issued on Thursday, the IB said a life insurance company could not hold shares in another life insurance company. "Likewise, a non-life insurance company cannot own shares of another non-life insurance company," stated the IB direction. "But, a non-life insurance company can hold shares in another life insurance company or vice versa," said IB spokesman Shekhar Kumar Aryal.
The IB has also told insurance companies that if they have already purchased shares of another company of a similar nature, they should sell them as soon as possible and inform the board about it. Following the policy of Nepal Rastra Bank (NRB) which has forbidden financial institutions from maintaining cross-holding, the IB decided to make a similar provision in the insurance industry. NRB had made such a provision some years ago. Some banks including Rastriya Banijya Bank (RBB) are yet to end cross-holding as per the central bank's direction. RBB has shares in Nepal Investment Bank, but it has been excused as it is a government-owned bank. "The main aim of the new provision is to help insurance companies to be competitive," Aryal said. "This provision will prevent two or more companies in which the same company has investments to compromise instead of going for competition," he said.
IB officials said that it took this move after it found that newly established Surya Life Insurance Company had purchased 100 shares of Nepal Life Insurance Company. The officials said that they had not found evidence of other companies owning shares in multiple insurance companies. Vice president of the Insurers' Association Ramesh Kumar Bhattarai termed the IB decision "good" to ensure healthy competition among insurance companies. He said that the IB had followed NRB in making such a provision as it had helped the banking system to become more competitive.
Source:ekantipur
IB officials said that it took this move after it found that newly established Surya Life Insurance Company had purchased 100 shares of Nepal Life Insurance Company. The officials said that they had not found evidence of other companies owning shares in multiple insurance companies. Vice president of the Insurers' Association Ramesh Kumar Bhattarai termed the IB decision "good" to ensure healthy competition among insurance companies. He said that the IB had followed NRB in making such a provision as it had helped the banking system to become more competitive.
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