IME Life New

Reinsurers are required to have the adequacy of retrocession checked by actuaries.

SPIL
Global College
Nepal Life New

Kathmandu. It has been made mandatory for reinsurance companies to have the adequacy of reinsurance (retrocess) checked by the insurer every year.

This has been made mandatory by the recently implemented Insurance Regulations, 2081. Section 31 of the Regulations stipulates other provisions related to reinsurance. In which, it is stipulated that the reinsurer must have the retrocession done by the insurer checked every year to see if it is appropriate and adequate.

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According to Section 81 of the Insurance Act, 2079, there is a provision that the insurer must reinsurance the remaining part of the risk it assumes or cannot assume. However, there is no provision in the Act regarding the need for insurers engaged in reinsurance business to check the adequacy of retrocession.

Similarly, the regulations stipulate that retrocession should be conducted based on the risks in the reinsurance business, the nature of the business, the risk-bearing capacity, and the credit rating of the reinsurer, and that the technical and financial capacity of the reinsurer should be analyzed before retrocession.

The regulations also stipulate that an insurer cannot obtain 100% reinsurance without assuming the risk covered by each insurance policy issued. The regulations stipulate that insurers engaged in reinsurance business must retrocession the remaining portion of the risk they assume.

The regulations make it mandatory for insurers to select reinsurers that meet the criteria set by the authority for the purpose of reinsurance.

Currently, there are two reinsurance companies operating in Nepal. One of them is Himalayan Reinsurance, promoted by the private sector, and the other is the government-owned Nepal Reinsurance Company.

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