History of Insurance:
The History of Insurance is the outcome of the historical necessity of events following with the suffering of people. Insurance had been known in different forms for many centuries and in the Greek and Roman civilizations, a type of insurance prevailed whereby everyone was made to contribute, according to his ability to pay. A levy following calamities such as floods, earthquakes, and fires, which could destroy the whole part of towns. Insurance, as we know it today, was developed into a business due to the rapid expansion of trade from Europe to all parts of the world and the serious losses being sustained by merchants to their ships and valuable cargoes due to not only the ”Acts of God” on the high seas but also from pirates and various wars in the sixteenth and seventeenth centuries.
To protect themselves, they formed associations whereby a percentage of the value of the expected risk was put into a common fund for the benefit of any member suffering a loss. A favorite meeting place was a London coffee house owned by Edward Lloyd and Lloyds of London. These were the world-famous insurance organizations that began the business from their small premises. Later on, joint-stock companies as underwriters at Lloyds were founded and it is still in business today although the insurance office was incorporated in 1710 A.D.
The international diversification of risk was made possible since London was famous as a center of risk diversification. And today, there are thousands of Insurance Companies throughout the world that provide reinsurance to spread risks.
History of Insurance in Nepal:
Growth of insurance in Nepal dates back to the history of insurance business that started during the period of the 1940s. Nepal Insurance and Transport Company is said to be the first insurance company in Nepal that was established in 1947. The service provided and extended by this company was not comprehensive and limited in certain areas of the general insurance. At the same time, there were the developments of National Life and General Insurance Company and Deposit Insurances and Credit Guarantee Corporation.
At that time, Nepal had to remain mostly dependent on Indian Insurance Companies, especially for the life insurance business. Lack of comprehensive services and the dominant role of the foreign companies particularly the Indian Insurance companies took over the major share of the insurance market of Nepal that caused the national capital outflow of the Country. The nation realized the drawback and felt a need to establish a national-level insurance company in Nepal.
Consequently, National Insurance Corporation Private Limited was established in 1968. Later on, it was converted into a corporation in 1969 locally known as ”Rastriya Beema Sansthan” under National Insurance Corporation Act, 1968.
Initially, this corporation had dealt only in general insurance but since 1973, it has started life insurance business also side by side with general insurance and with other varieties of insurance. The insurance industry could not pick up the pace until the restoration of democracy in 1990. However, after 1993 the second generation insurance industry developed in Nepal. The House of Representatives passed the Insurance Act, 1992.
Similarly, the Insurance Regulation, 1993 also came into force. “Beema Samitee” i.e., synonymous to Insurance Board has been formed in 1992 under the Ministry of Finance of Nepal Government as an autonomous body. The preamble of the Insurance Act, 1992 clearly states the purpose of the Insurance Board as “to systematize, regularize, develop and regulate the insurance business in Nepal”. Various reforms have been undergoing in the insurance business.
The insurance committee has defined eligibility criteria for the establishment of insurance companies both in life and non-life types. Since the insurance committee has made it mandatory to increase capital base and restrictions on investment only in less risky portfolios depending on the category of banks and financial institutions on their track record of profit and financial position. The number of insurance companies in Nepal has been gradually increasing year by year. At present, there are 39 insurance companies in Nepal.
List of Insurance companies in Nepal
a. List of Non-Life insurance companies in Nepal
- Ajod Insurance Company Limited
- Everest Insurance Company Limited
- General Insurance Company Nepal Limited
- IME General Insurance Company Limited
- Himalayan General Insurance Company Limited
- Lumbini General Insurance Company Limited
- National Insurance Company Limited
- Neco Insurance Company Limited
- Nepal Insurance Company Limited
- NLG Insurance Company Limited
- Oriental Insurance Company Limited
- Prabhu Insurance Company Limited
- Premier Insurance Company (Nepal) Limited
- Prudential Insurance Company Limited
- Rastriya Beema Company Limited
- Sagarmatha Insurance Company Limited
- Sanima General Insurance Company Limited
- Shikhar Insurance Company Limited
- Siddartha Insurance Company Limited
- United Insurance Company (Nepal) Limited
b. List of Life insurance companies in Nepal
- American Life Insurance Company Limited (MetLife)
- Asian Life Insurance Company Limited
- Citizen Life Insurance Company Limited
- Gurans Life Insurance Company Limited
- I.M.E. Life Insurance Company Limited
- Jyoti Life Insurance Company Limited
- Life Insurance Corporation (Nepal) Limited
- Mahalaxmi Life Insurance Company Limited
- National Life Insurance Company Limited
- Nepal Life Insurance Company Limited
- Prabhu Life Insurance Company Limited
- Prime Life Insurance Company Limited
- Rastriya Beema Sansthan
- Reliable Nepal Life Insurance Limited
- Reliance Life Insurance Limited
- Sanima Life Insurance Company Limited
- Sun Nepal Life Insurance Company Limited
- Surya Life Insurance Company Limited
- Union Life Insurance Company Limited
The insurance committee (Beema Samiti) made a provision to separate life insurance from non-life insurance companies. Then, again a number of life insurance companies like Nepal Life Insurance Company, Life Insurance Company of Nepal, American Life Insurance Company, etc. developed and operated insurance business in the country. Insurance companies in the nation’s financial system have been able to mobilize the funds to an amount equivalent to Rs.15,000 million.
Liberalized economic policy and the priority given to the privatization by the Nepal Government of Nepal added extra energy to develop the insurance industry in Nepal. Various development projects, an increasing number of domestic airlines and the international airlines operating their services in Nepal have also helped in extending the insurance market in Nepal. Many new emerging second-generation non-life insurance companies like Premier Insurance Company, Himalayan General Insurance Company, Alliance Insurance Company, United Insurance Company, Sagarmatha Insurance Company, etc, developed.
In the non-life insurance business, broad areas of services covered are fire insurance, marine insurance, engineering and contract insurance, air insurance and miscellaneous insurance that include theft insurance, crop insurance, earthquake insurance and so on. But, with the act of terrorism creating shock waves on September 11, 2001, new emerging challenges have been created and international insurance companies where reinsurance is done became difficult.
The terrorism fund was created to combat the possibility of losses from threats of terrorist acts due to domestic insurgency causing loss of life and properties of unexpected scale as well as at the global level. Terrorism Insurance Act, 2002 was passed to share losses from future terrorist attacks within the Department of Treasury in the USA. At present, the overall international scenario is proving week due to downsizing of the business cycle and many developing economies are facing the challenges of micro-economic imbalances. As a result, the insurance industry is affected seriously and Nepal is not an exception to it.