Kathmandu. Since the Insurance Act 2079 does not specify the term or age limit of the members or chairpersons to be appointed to the board of directors of the insurer, it is expected to pose challenges in institutional governance. <\/p>\n
Section 48 provides that the term of office of a director is a maximum of four years and he can be reappointed or nominated. This section provides that an independent director can be appointed only once. Section 47 of the Act provides for the formation of a board of directors of an insurer. This section provides for an independent board of directors of at least 5 and a maximum of 7 members. <\/p>\n
Although Section 48 prescribes a term limit in the case of an independent director, there is no limit on tenure in the case of directors elected or represented by ordinary shareholders or founding shareholders. They will continue to be directors for as long as they are and till their death. In Nepal, 60 years is generally considered to be the age of eligibility for employment. Although the experience of the board members will increase as they get older, there is a risk of poor decision-making, ignorance of new technologies and challenges, and poor productivity. <\/p>\n
Moreover, when the same people dominate the board of directors of the same company for a long time, it creates challenges in corporate governance. There is a strong possibility that the board of directors will make unfair policy decisions by influencing the top management and misuse the investment of the insurance company for their own selfish projects or works. <\/p>\n
Using the loophole in the Act, the promoter group of the insurer is in the wrong practice of bringing the same person to the board of directors as an independent director and bringing him back to the board of directors as a representative of the promoter shareholders or ordinary shareholders before the completion of the first term. <\/p>\n
The legislative intention behind the provision that an independent director can be appointed for only one term is that the board of directors should get good governance and the supervision and advice of the independent person. However, on the basis that the Insurance Act does not provide that a person who is an independent director cannot be re-appointed as an independent director for the second term, even the Nepal Insurance Authority has been silent when the insurer brings in the same person from any other cover. <\/p>\n
The lack of institutional good governance is the reason behind the extreme anomalies in the insurance sector in the South Asian neighboring country Bangladesh. There is no lack of regulatory controls and laws, but the same interest groups and the same people have been dominating the board of directors for a long time, and the directors have got the opportunity to use billions of rupees of the insurance fund for their personal interests. The directors of the insurance companies have maintained their ownership in the institutional shares of the company without investing money. Due to corruption and malpractices, the insurance companies there are now in a position where they are unable to pay the claims to the insured. <\/p>\n
According to The Financial Express, insurance companies in Bangladesh still have 70 billion Bangladeshi taka (rupees) to pay claims. After regulatory activism there, the claim payout ratio of insurers has now climbed to 57 percent. In Bangladesh, irregularities have come to light time and again that the board of directors of insurers invested in companies with their own financial interests, acquired share ownership without investing money, and did not deposit them in the accounts of insurance companies by spending the collected insurance premiums in collusion with the management of the board of directors. In addition, a life insurance company there has misappropriated more than a billion rupees to purchase land limited to paper on the pretext of running a housing scheme. <\/p>\n
In view of the allegations mentioned in the charge sheet filed by the Government of Nepal against the promoters and directors of Himalayan Reinsurance and their affiliated insurance companies, insurance broker companies, share investment companies and the evidence made for those allegations, the state of institutional governance in Nepal’s insurance sector is also weak. The regulatory impact is very weak. In such a situation, the Nepal Insurance Authority should immediately stop misinterpreting the loopholes in the Insurance Act. Also, the Authority should immediately initiate the amendment of the vague and inadequate provisions in the Insurance Act.<\/p>\n","protected":false},"excerpt":{"rendered":"
Kathmandu. Since the Insurance Act 2079 does not specify the term or age limit of the members or chairpersons to be appointed to the board of directors of the insurer, it is expected to pose challenges in institutional governance. Section 48 provides that the term of office of a director is a maximum of four […]<\/p>\n","protected":false},"author":5,"featured_media":320797,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[45031,45067,45159],"tags":[],"class_list":["post-320818","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-banner-news-en","category-important-en","category-news-en"],"acf":[],"_links":{"self":[{"href":"https:\/\/insurancekhabar.com\/ikbrapi\/wp\/v2\/posts\/320818","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/insurancekhabar.com\/ikbrapi\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/insurancekhabar.com\/ikbrapi\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/insurancekhabar.com\/ikbrapi\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/insurancekhabar.com\/ikbrapi\/wp\/v2\/comments?post=320818"}],"version-history":[{"count":1,"href":"https:\/\/insurancekhabar.com\/ikbrapi\/wp\/v2\/posts\/320818\/revisions"}],"predecessor-version":[{"id":320819,"href":"https:\/\/insurancekhabar.com\/ikbrapi\/wp\/v2\/posts\/320818\/revisions\/320819"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/insurancekhabar.com\/ikbrapi\/wp\/v2\/media\/320797"}],"wp:attachment":[{"href":"https:\/\/insurancekhabar.com\/ikbrapi\/wp\/v2\/media?parent=320818"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/insurancekhabar.com\/ikbrapi\/wp\/v2\/categories?post=320818"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/insurancekhabar.com\/ikbrapi\/wp\/v2\/tags?post=320818"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}