-  Monday 28 September 2020

MoF takes over RBS split process

KATHMANDU, Feb 9 - As the state-owned insurer, Rastriya Beema Samsthan (RBS), failed to comply with Insurance Board's (IB's) directives to segregate its life and non-life businesses, Ministry of Finance (MoF) has taken over the matter to facilitate its separation.
"It (MoF) has commenced discussions on ways to remove all existing obstacles impeding the split process," Bhoj Raj Sharma, executive chairman of the Samsthan told the Post. He added that the IB has already endorsed the process, leaving it for the MoF to expedite.

The IB, the regulator of the insurance sector, had asked the composite insurers to split the businesses in 2000, as per the Insurance Act, which barred operation of joint businesses for any companies.

Subsequently, RBS and the private sector's National Life and General Insurance Company (NLGIC) were directed to comply with the Act by April 13, 2002.

While NLGIC separated the business at the end of the last fiscal year through the establishment of a subsidiary company, the state-owned RBS is still to abide by it.

The reason for the delay, according to the officials, is the Act of the Samsthan itself, which provisions the corporation to operate both life and non-life insurance services.

They said the splitting of the samsthan (corporation) called for nullifying or amending of the RBS Act, 1967 under which it was established.

"As that can be done by the government alone, the MoF has taken over the matter to facilitate the process," said Sharma, adding that RBS would push the split process as soon as the MoF decides on the fate of the Act.

Officials of the RBS said that once the complexities related to the charter is resolved, the modality for separating would be developed and separation would take no time.

They claimed that the separation of the business components would be relatively easier as two businesses are being conducted independently and are handled by separate sets of manpower.

However, people knowledgeable to the matter said that the corporation's failure in updating its financial statement could pose another big challenge in registering the two companies as separate entities.

The RBS has not audited its financial statement since the fiscal year 1996/97. Officials in the past have been citing it as the major obstacle to separate the businesses.

The equity investment of the RBS' life insurance component comprises 27.78 percent from the government, 55.56 percent from Nepal Rastra Bank (NRB) and 16.67 percent from Nepal Bank Limited (NBL).

Similarly, its general insurance has an investment of 47.61 percent, 29.30 percent, 10.99 percent and 12.10 percent from the government, NRB, NBL and the public respectively.

The Kathmandu post

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