Kathmandu. The Insurance Act, 2079 has envisaged the chairman of the Nepal Insurance Authority as the absolute chairman. Due to the controversial and legal loopholes of the Act, there is a policy risk that the entire insurance sector will be operated from the chairman of the AUTHORITY ‘happy’ or ‘unhappy’.
The Insurance Act has delegated unlimited powers to the executive chairman. Although the Act provides for a board of directors of the AUTHORITY, there is a provision that the chairman himself can take any decision or order by making the role of the committee serious.
From Section 6 to Section 18 of the Act, provisions have been made regarding the qualifications, disqualification of the CHAIRMAN, members, swearing-in board of directors meeting, quorum number, number of meetings, presiding over the meeting and duties and powers of the chairman. Article 13 provides for the functions, duties and powers of the chairperson.
For what purpose is the Board of Directors of the Authority required? When asked, the board TAG_OPEN_span_69 of directors is required only for the insurance policy and other policies, rules, bye-laws, guidelines, procedures, periodic plans and annual program approval of the AUTHORITY. The Act does not see the need for a board of directors in any work other than making these policy provisions.
Executive Chairman’s absolute rights:
Functions, duties and rights of additional chairpersons mentioned elsewhere in the Insurance Act 2079
(a) To act as the Chief Administrative and Chief Executive Officer of the Authority,
(b) Formulate and submit the insurance policy and other policies, rules, regulations, guidelines, procedures, periodic plans and annual programs of the AUTHORITY to the committee for approval,
(c) to implement the insurance policy and other policies, bye-laws, guidelines, procedures, and annual programs of the Authority,
(d) To operate and manage the Authority,
(e) To organize and regulate the functions to be done by the Authority,
(f) To mediate a dispute between the insurer and the insured,
(g) to regulate, supervise or regulate the insurance business,
(h) to approve or order the opening of branches, sub-branches and other offices of the insurer
(i) To take regulatory action in exercise of the powers referred to in clauses (a), (b), (c), (d) and (e) of sub-section (1) of section 134 and clauses (b) and (c) of sub-section (2),
(j) to do or to do the necessary work by delegating the powers conferred upon him to the subordinate staff,
(k) to represent or make representation on behalf of the Authority in international organizations.
प्राधिकरणको अध्यक्ष पदमुक्त हुने सम्भावनालाई बीमा ऐनले किन परिकल्पनै गरेन ?
The authority conferred through sub-section (i) of Section 13 has become the meo to make the chairman autocratic. There is a danger that if the chairman of the AUTHORITY is ‘happy’, he will be exempted from action and any action can be taken if he is ‘unhappy’. Because there is no compulsion for the chairman to consult anyone on whether to take action of regulation or not, there is no compulsion to take a decision by keeping other office-bearers of the board of directors on the right side.
This provision has pushed the entire insurance sector at risk of instability by giving a narrow definition that the Insurance Act or the Insurance Authority is the executive chairman.
According to the Insurance Act 2049 BS, the authority of the then insurance committee was vested in the board of directors of the insurance committee on the basis of collective decision rather than limiting the authority of the then insurance committee to the chairman.
According to the Insurance Act 2049 BS, most of the decisions including insurance regulation, action, alert, suspension and withdrawal of action had to be taken by the board of directors. Through the Insurance Act 2079 BS, the federal parliament has made the board of directors almost unreasonable. With the proper implementation of the provisions of this Act, it has become possible to prove any mechanism and board of directors of the AUTHORITY useless by meeting alone at the residence of the Chairman of the Authority or any other place.
What is the provision in Section 134 of the Insurance Act 2079 regarding regulatory action against the insurer:
(1) If any insurer is found to have violated the Insurance Act or the rules, bye-laws or directions or orders made under this Act or has submitted wrong details or data to the Authority, the Authority may take the following action against such insurer or any of his directors, officials, executive chief or employees or insurance intermediaries or other insurance service providers:
(a) To warn or warn in writing,
(b) to acknowledge improvement or to direct any improvement to be made within a certain period of time,
(c) taking control of the insurer’s property or bookkeeping,
(d) prohibiting the distribution or issuance of dividends, bonus shares or right shares distributed to shareholders,
(e) to order the insurer to suspend or suspend the director, officer, executive chief or employee of the insurer and the insurance intermediary,
(f) partially or outright prohibiting the operation of the insurance business,
(g) To file an application before the concerned High Court for the cancellation of the licensed insurance company,
(2) If the founder, shareholder, director, executive chief or office-bearer, employee or any concerned person of any insurer violates this Act or the rules, bye-laws, directions or orders made under this Act, the Authority may, considering the nature and severity of the violation, take any one or more of the following actions:
(a) to seize and withhold the shares of the concerned insurer held by him and to sell the shares to other persons or entities,
(b) to withhold or suspend or suspend certain or all facilities, including meetings and remuneration, to the board of directors, directors, office-bearers and other employees of the insurer,
(c) Removal of the Chairman, Director, Executive Chief or Employee of the insurer from that office by giving written notice, if the insurer is found to be not acting in the interest of the insured, shareholder or insurer by regulation, inspection or non-compliance of the Authority,
(d) If anyone has taken or provided salary, allowances and other benefits in contravention of this Act or rules, bye-laws, directions or orders made under this Act, then all such service facilities or the amount to be charged therefor and the interest in accordance with the prevailing law shall be recovered from the persons providing such service facilities,
(e) To order the concerned insurer to write to the body where the director, officer, executive chief or employee of the insurer is professionally associated with it for action.
In order to exercise any of these powers related to regulation, the CHAIRMAN of the AUTHORITY is not obliged to seek opinion from anyone, gather consent or make a collective decision. They have the right to do everything alone.
What is the provision of the Rastra Bank Act:
According to the Nepal Rastra Bank Act 2058 (with amendment), the authority to regulate and take action of the bank is vested in the board of directors and not the governor. Some of the provisions contained in sub-section of Section 84 of the Act are:
Sub-section (6) – The officer or expert inspecting and supervising pursuant to this section shall submit a report of the inspection and supervision carried out by him to the Governor within the prescribed period.
Sub-section (7): The report submitted pursuant to Sub-section (6) shall be submitted in the next meeting of the Committee.
Sub-section (8) – The Committee may take necessary decisions on the report submitted pursuant to Sub-section (7) and give necessary instructions to the Governor regarding the steps to be taken in this regard. It will be the responsibility of the Governor to comply with such instructions.
