Kathmandu. The Nepal Insurance Authority (INSURANCE) has issued directives regarding foreign exchange recommendation of the insurer, 2082 BS. According to the AUTHORITY, this directive will start immediately.
According to the directive, the signature of the Chief Executive Officer (CEO) of the insurer has been made mandatory while seeking recommendation from the Authority for exchange of foreign currency. The insurer will have to preserve the documents submitted for the foreign exchange recommendation and the approval letter for at least five years from the date of completion of the work.
The directive has been issued in exercise of the powers conferred by Section 166 of the Insurance Act, 2079 as it is desirable to make transparent and systematic the foreign currency exchange recommendation process to be paid by the insurer for reinsurance, retrocession and consultancy services imported from abroad. Some time ago, Nepal Rastra Bank (NRB) had also made it mandatory for insurance companies to take the facility of exchanging foreign currency.
According to the directive, the insurer will now have to pay the reinsurance fee and insurance claim amount, dividend refund, consultancy service amount related to reinsurance done directly or with the involvement of insurance broker to foreign insurers or foreign service providers providing services to foreign investors or insurers investing in insurers in Nepal. In addition to this directive, the insurer will also have to comply with the prevailing laws related to foreign investment and the instructions issued by the Nepal Rastra Bank regarding foreign exchange management.
Similarly, when the insurer seeks recommendation, it has to seek recommendation for payment only in Indian currency in case of India and in the case of other countries in the prevailing domestic currency of that country or convertible US dollar. When the insurer seeks foreign exchange recommendation for reinsurance fee, it has been directed to submit a summary with the necessary details and self-declaration of the remaining risk 100 percent handed over except the share of risk held by the insurer.
According to the NRA, if the existing tax, service fee, reinsurance commission or any such exemption is available while seeking recommendation for insurer exchange recommendation, then the recommendation should be sought for remittance through banks and financial institutions licensed from the Rastra Bank for the payment of the net amount. While recommending foreign currency exchange, the AUTHORITY has to do so only in the name of the concerned reinsurer or reinsurance broker or foreign service provider issuing debit note or invoice.
Similarly, the CEO of the insurer will have to sign the application to be submitted to the AUTHORITY for the recommendation of exchange, while the concerned employee will have to sign the copy of all the attached documents to be submitted for the exchange along with the seal of the insurer or reinsurer.
Now, the insurer will have to pay within 15 days in case of commercial bank and 30 days in case of Nepal Rastra Bank from the date of receipt of exchange recommendation from the AUTHORITY and submit the certificate to the AUTHORITY within three days.
On the other hand, while seeking foreign currency exchange for reinsurance or retrosection, the AUTHORITY will recommend only foreign reinsurers and reinsurance brokers listed as per the reinsurance guidelines of the insurer issued by the AUTHORITY and re-insurers rated according to the same guidelines. However, the directive stipulates that this provision should not interfere with seeking or providing foreign exchange recommendations for payment of the amount related to the insurance or reinsurance agreement made before the reinsurance guidelines of the insurer came into force.
