Kathmandu. Hundreds of thousands of youths leave Nepal every year for foreign employment. This number is increasing more and more. Against this backdrop, the expansion of branches abroad by Nepali insurance companies to ensure the safety and savings of these workers is not only a business necessity but also a strategic step for the national economy.
Currently, more than 50 lakh Nepalis are in foreign employment. It will be a big market for insurance companies if they can collect a part of the remittances sent to Nepal as insurance premium.
If a Nepali insurance company has a branch in countries like Qatar, United Arab Emirates, Saudi Arabia or Malaysia, the workers can buy insurance policies from the company of their own country. The presence of Nepali companies will be very reassuring for the workers who find it difficult to understand the complex conditions of foreign companies.
Ease of Collection of Insurance Premium: Nepalese currently living abroad should send money in Nepal or complete the process through their relatives if they want to get insurance. In doing so, the recipient of the money has to face the problem of misuse of money, fraud, and not paying installments on time. If you have a branch abroad, you can pay the insurance premium in the local currency. Which the company can bring to Nepal in the form of foreign currency.
Simplification of Claim Payment: It is a very cumbersome process to get claim payment in case of accident or death in course of foreign employment. If there is a branch abroad, the victim’s family can be provided relief quickly by completing the paperwork by reaching the incident site.
Savings and Investment Opportunities: The money earned by the workers will be saved safely through a term life insurance plan instead of being spent unnecessarily. This will serve as capital for them to return to Nepal. Investing in any profession will help.
Legal provisions and procedural path
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Although the Insurance Act, 2079 allows Nepali insurers to open branches abroad, some important procedures have to be completed for this.
Requirement of Bilateral Agreement: A Nepali insurance company should take permission from the regulatory body of that country such as FSA of Dubai or the Central Bank of Malaysia to open a branch abroad. For this, it is necessary to have a ‘bilateral understanding on insurance’ between the Government of Nepal and the concerned countries.
Capital Criteria: The financial position of a company that wants to open a branch abroad should be very strong. The minimum capital and solvency ratio of the authority should be maintained.
Economic Benefits Foreign Exchange Source
Nepal’s foreign exchange reserves will be directly benefited when Nepali insurance companies go abroad. A certain portion of the profit earned abroad and the collected insurance premium will help to improve the balance of payment situation when it enters Nepal. This has the potential to establish the insurance sector as an export-oriented service of Nepal.
Apart from this, the workers who are currently sending money to Nepal for the payment of insurance installments through illegal means (hundi) will also be curbed to some extent by paying the insurance premium in foreign currency.
The presence of insurance companies in countries with Nepali immigrants also means diverting remittances to productive sectors. For this, the government should first open the legal route to the insurance company even if it is only for the purpose of opening a branch office abroad.
In the second phase, the government and NEA, using the authority given by the Insurance Act, 2079, should coordinate with the regulators of other countries through diplomatic initiatives and facilitate Nepali insurance companies to open branches in foreign markets.
It is not easy due to the strict conditions of the foreign government to open a branch abroad, the high fees to be paid for the license and the amount to be deposited for the guarantee. Therefore, Nepal will have to rely on the ability of the government of the concerned country to enforce a relaxed provision in favour of the insurer through diplomatic initiatives.
