Kathmandu. The incidents of vandalism and arson that caused damage to public and private property across the country during the protests of teenagers on September 9-24 have put Nepal’s insurance companies under tremendous financial pressure.
Claims worth Rs 23.44 billion have been registered so far due to extensive damage to businesses, shops, offices and vehicles. Since the government has not insured public property, the damage to insured property is much less than the reality.
After the non-life insurers had to pay such a huge amount in a short period of time, now there are signs of increasing the reinsurance premium in their annual agreement with foreign reinsurance. This has now strengthened the possibility that the reinsurance premium will be expensive during the renewal of the reinsurance agreement for one year on January 1, 2026. The reinsurance agreement between the insurance companies is renewed every year from January 1, 2018.
Insurance companies assume the risk that their assets can bear and transfer the rest of the risk to another large insurance company, i.e. a reinsurance company. In the case of savings, both parties share the savings according to the reinsurance treaty and in case of loss, the loss is divided on the basis of this treaty.
The latest political events have increased both damage and risk in Nepal. Apart from this, the increase in floods, landslides and droughts due to climate change have also made foreign reinsurance companies see Nepal as a high-risk market.
For insurance companies, rising reinsurance charges not only mean higher costs but also tighter risk appetite. This will ultimately affect both general and business customers who insure their homes, shops, businesses or cars. Insurance premiums may become more expensive as reinsurance premiums increase. In some cases, the insurer may have a new condition to accept the risk. Documents and evidence may be demanded more than ever in the process of payment of claims.
On the other hand, insurance companies can add additional fees if they accept the risk of commercial property of CG Group, IME Group, Shankar Group, Bhatbhateni Group due to their relationship with political parties.
Another reason that is complicating the reinsurance market in Nepal is the increasing risk of natural disasters every year. The incidents of flood, landslide, inundation, hailstorm and excessive rainfall are gradually increasing. According to the Climate Risk Index 2025 report published by Germanwatch, climate-induced disasters cause an estimated annual economic loss of 0.258 percent of Nepal’s GDP to $4221.3 million.
The impact of climate change on unseasonal floods and landslides has led to an increase in the number of damages claimed in hydropower projects in Nepal. As foreign reinsurance companies also evaluate such long-term risks, there is a possibility of making Nepal more expensive by putting Nepal in the list of high risk.
In the event of a recurrence of major damage like the current one, not only the reinsurance charges but also the protection against the risks available in the insurance service may be reduced.
In the changing context, there is an even greater need for insurance companies to revise risk assessment methods, insurers to protect evidence of damages, and governments and regulators to take effective steps in disaster management and prevention.
