Kathmandu. The solvency ratio of life insurance companies is about 2 percent on an average.
Recently released in the last fiscal year 2082. According to the revised financial statements of 83 life insurance companies, the average solvency ratio of 13 life insurance companies (excluding National Life Insurance Company) is 1.84. Nepal Insurance Authority (NEA) has fixed the solvency ratio of life insurer at 1.3. However, the solvency ratio of all the 13 life insurers is above the regulatory provisions.
The solvency ratio of the life insurer at 1.3 means that the insurer should have at least Rs 1.30 worth of financial assets to pay off the liability of Rs 1. For a life insurer, solvency refers to its ability to repay its long-term obligations, especially those of the insured, from one’s own assets.
The solvency ratio is one of the most important financial metrics used to assess a company’s financial health and the soundness of its balance sheet. A high ratio indicates a strong financial position and a strong ability to withstand unexpected losses and meet future obligations.
According to the statistics, IME Life has the highest solvency ratio of 2.59 among life insurers. This is almost double the solvency ratio of 1.3 for life insurers.
Solvency ratio of Reliable Nepal Life Insurance stands at 2.54 while Sun Nepal Life Insurance has a solvency ratio of 2.44.
Himalayan Life Insurance has the lowest solvency ratio of 1.32. This is close to the minimum limit set by the authority.
