18th September 2025, Kathmandu
The total insurance claims resulting from the recent “Gen Z” protests in Nepal amount to NRs 20.7 billion, according to the Nepal Insurance Authority (NIA).
Insurance Claims Divided
The total insurance claims resulting from the recent “Gen Z” protests in Nepal amount to NRs 20.7 billion, according to the Nepal Insurance Athority (NIA). While this news caused widespread alarm and led to a sharp drop in the share prices of reinsurance companies like Nepal Reinsurance Company (Nepal Re) and Himalayan Reinsurance Company, the actual financial liability is significantly lower than this headline figure. The market reaction appears to be based on an incomplete understanding of how the insurance and reinsurance industries handle such large-scale claims. Both Nepal Re and Himalayan Re are financially sound and prepared to meet their obligations due to industry-standard risk management practices and retrocession agreements.
Understanding the Financial Reality
The total claims figure of NRs 20.7 billion does not represent the full financial responsibility of the insurance companies. A senior official from NIA confirmed that during the valuation and settlement process, the final payout is expected to be 15-25% lower than the total claims figure, based on actual damage assessments and risk evaluations. This means the final payout is projected to be around NRs 16-17 billion. The insurance industry in Nepal has a structured process for handling such claims, which is based on an intricate network of shared responsibility.
Reinsurance and Retrocession Explained
Claims related to civil unrest and terrorism are not borne solely by a single insurance company. Instead, the liability is shared between the primary insurers and reinsurance companies. In Nepal, Nepal Reinsurance Company covers 65% of the claims, while the remaining 35% is the responsibility of the direct insurers. Applying this ratio to the NRs 20.7 billion claims, Nepal Re’s share is approximately NRs 14 billion, while Himalayan Re’s portion is about NRs 3.3 billion. However, even these figures are not the final liability for the domestic reinsurers. After final adjustments, Nepal Re’s likely payout is expected to be in the range of NRs 7.5–8 billion.
A crucial element that protects these domestic reinsurers is international retrocession. This is a risk-sharing mechanism where a reinsurance company cedes a portion of its risk to other, often foreign, reinsurers. Both Nepal Re and Himalayan Re have retroceded a significant part of their risk to A-rated foreign reinsurers. This means a large percentage of the final liability for the claims is transferred abroad, providing a robust financial buffer. A senior official from Nepal Re has explicitly stated that “there is no cause for alarm” because their foreign partners will cover a significant portion of the claims. This practice is a standard industry protocol to safeguard against catastrophic losses and ensure the solvency of domestic players.
Market Reaction and Future Outlook
The market’s panicked reaction, which saw the share prices of both Nepal Re and Himalayan Re fall sharply, appears to have been fueled by a misunderstanding of these complex risk-sharing mechanisms. The public and investors initially focused on the large total claims figure without considering the significant portion that would be covered by international retrocession partners. The NIA has affirmed that due to sufficient retrocession coverage, domestic reinsurers are not under immediate financial stress. This structured arrangement, combined with prudent risk management and adherence to international standards, ensures that even with a high volume of claims, the financial stability of Nepal’s reinsurance sector remains intact.
This incident serves as a vital lesson for investors about the complexities of the insurance sector, where unexpected events can trigger market volatility. It highlights the importance of looking beyond initial headlines and understanding the underlying financial and regulatory frameworks that govern the industry. While the short-term market impact was negative, the long-term outlook for Nepal’s reinsurance companies remains strong, as they are well-equipped to handle even extraordinary claim events efficiently.
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