INSURANCE LAW

The Nepal Insurance Authority (NIA) is the government agency responsible for regulating the
insurance sector in Nepal. The NIA has a number of measures in place to ensure good
governance, solvency, and the protection of the interests of insured persons.

The NIA has a number of measures in place to ensure good governance in the insurance sector.
These measures include:

● Establishing a code of conduct for insurance companies: The NIA has established a code
of conduct for insurance companies. This code sets out the standards of behavior that
insurance companies are expected to uphold.
● Requiring insurance companies to have a board of directors: Insurance companies are
required to have a board of directors. The board of directors is responsible for overseeing
the management of the insurance company and ensuring that it complies with the law.
● Requiring insurance companies to have a chief executive officer: Insurance companies
are required to have a chief executive officer (CEO). The CEO is responsible for the
day-to-day management of the insurance company.
● Requiring insurance companies to have a risk management framework: Insurance
companies are required to have a risk management framework. This framework is
designed to identify and manage the risks that the insurance company faces.

Similarly,the NIA has a number of measures in place to ensure the solvency of insurance
companies. These measures include:

● Requiring insurance companies to maintain a minimum solvency ratio: Insurance

companies are required to maintain a minimum solvency ratio. The solvency ratio is a
measure of the financial strength of an insurance company.
● Requiring insurance companies to have adequate reserves: Insurance companies are
required to have adequate reserves. Reserves are funds that are set aside to pay for future
claims.
● Requiring insurance companies to submit regular financial statements: Insurance
companies are required to submit regular financial statements to the NIA. These financial
statements are used to assess the financial health of the insurance company.

Likewise,the NIA has a number of measures in place to protect the interests of insured persons.
These measures include:
 ● Requiring insurance companies to provide clear and transparent information to
policyholders: Insurance companies are required to provide clear and transparent
information to policyholders. This information should include the terms and conditions of
the insurance policy, the risks that are covered, and the benefits that are payable.
● Requiring insurance companies to pay claims promptly: Insurance companies are
required to pay claims promptly. This means that insurance companies should pay claims
within a reasonable period of time.
● Requiring insurance companies to have a complaints mechanism: Insurance companies
are required to have a complaints mechanism. This mechanism allows policyholders to
complain about the way that their insurance company has handled their claim.

The NIA has also issued a number of rules, circulars, and guidelines in connection with ensuring
good governance, solvency, and the protection of the interests of insured persons. These rules,
circulars, and guidelines provide more detailed information on the measures that insurance
companies are required to take.

The NIA is committed to ensuring the soundness and stability of the insurance sector in Nepal.
The measures that the NIA has put in place are designed to protect the interests of policyholders
and to promote the growth of the insurance sector.

In addition to this,according to the general provisions in many insurance acts, including the
Insurance Act, 2022, the powers, functions, and duties of the Authority (in this case, the Nepal
Insurance Authority) typically includes;

Section 5 of the Insurance Act,2022 , the following are the powers, functions and duties of the
authority as:

● To act as an advisor of the Government of Nepal regarding Insurance,

● To draft the National Policy on Insurance and make recommendation to Government of Nepal,
● To grant prior approval for the establishment of Insurance company, issue license or revoke
such license,
● To formulate necessary Bylaws, Directives, guidelines or orders for the Insurance Business,
● To issues licenses to Insurance Intermediaries, renew and revoke such licenses,
● To determine the Capital and Capital fund,
● To prepare and implement the necessary programs to make the insurance business systematic,
regular, competitive and credible,
● To conduct or cause to conduct the study, research, trainings, orientation or outreach programs
for the development and expansion of Insurance Business,
● To provide the decision on the complaints filed by insured against insurer regarding the
determination of insurance liability,
● To settle the disputes concerning various parties of insurance,
● To take necessary actions for minimization of risk in insurance business,
● To prepare and implement the programs for the development of human resources and for the
promotion of insurance education for the development of insurance business,
● To prepare and implement the insurance promotion programs to increase the access to
insurance by all the people,
● To promote microinsurance business to ensure the access to insurance of the people with low
income,
● To cooperate, coordinate and exchange information with other governmental, or non-
governmental organizations for the regulation, inspection, supervision and development of
insurance business,
● To cooperate with the foreign Insurance Regulatory Agency, international organization and
other organizations that conduct study, research and trainings in insurance,
● To represent the Government of Nepal or Authority in international organizations relating
Insurance Regulation and to obtain membership of such organizations,
● To operate Fund for protection of Policy holder’s interest and carry out or cause to carry out
other necessary activities,
● To coordinate with provinces regarding insurance,
● To carry out other necessary activities relating to insurance as a Regulatory agency.

To sum up, the Nepal Insurance Authority plays a crucial role in regulating and developing the
insurance sector in Nepal. With various powers and functions, it acts as an advisor to the
government, drafts the National Policy on Insurance, and formulates guidelines for the insurance
business. The Authority ensures the proper functioning of insurance companies by granting
licenses, determining capital requirements, and handling complaints and disputes filed by
policyholders. It also focuses on promoting insurance education, increasing insurance access for
all, including low-income individuals through microinsurance, and coordinating with provinces
for effective implementation.

Additionally, the Authority engages in international cooperation to enhance insurance regulation

and represents Nepal on the global stage. By carrying out these duties and activities, the Nepal
Insurance Authority aims to foster a systematic, regular, competitive, and credible insurance
market while safeguarding the interests of policyholders and promoting the overall growth of the
insurance industry in the country.
As for the various rules, circulars and guidelines that the NIA has issued in this connection; it
covers area like:

● Market Conduct: Rules and guidelines governing fair practices, ethical behavior, and
transparency in the insurance market to protect consumers interests.
● Policy Wording and Terms: Standards for policy contract language, disclosure requirements,
and clear communication with policyholders.
● Claims Settlement: Guidelines for the fair and timely settlement of insurance claims to ensure
policyholders rights are upheld.
● Investment Regulations: Rules on the types and limits of investments that insurance companies
can make to manage risks and protect policyholders funds.
● Consumer Protection: Guidelines on handling customer complaints, dispute resolution
mechanisms, and measures to protect the interests of policyholders.
● Risk Management and Internal Controls: Rules for implementing effective risk management
practices and internal control systems within insurance companies.
● Market Research and Reporting: Requirements for data reporting, market analysis, and
research to monitor industry trends and performance.
● Microinsurance Promotion: Guidelines for promoting microinsurance products to extend
insurance coverage to low-income individuals and vulnerable populations.
● Insurance Education: Initiatives to enhance public awareness of insurance products and their
benefits.
● International Cooperation: Guidelines for collaboration with foreign insurance regulatory
agencies and international organizations.