Insurance companies in Nepal have invested a total of Rs. 48.11 billion in the stock market during the first quarter of the current fiscal year. This is more than half of their total available funds for investment. Compared to the same period last year, this is a 55.55% increase. Last year, insurers had invested Rs. 30.93 billion.
Interest rates push money to stocks
The rise in stock investments comes as bank interest rates continue to fall. In the past, insurance companies preferred keeping most of their funds in fixed deposits, earning a small but steady return. Over 80% of their money used to go into bank deposits. Now, with lower interest rates and fewer attractive alternatives, insurers are shifting more funds to the stock market.
Regulations support stock investments
The Nepal Insurance Authority encourages insurers to diversify investments across different sectors. Recently, it also increased the limit for investing in listed public companies’ shares from 5% to 15% of a company’s paid-up capital. This regulatory change has given insurance companies more freedom to invest aggressively in the stock market.
Life and non-life insurers lead the trend
Life insurance companies invested Rs. 37.71 billion in stocks in the first quarter, a 51.66% rise from last year. Non-life insurers invested Rs. 5.16 billion, up 27.02% from the previous year. Reinsurance companies invested Rs. 5.09 billion, while microinsurance firms put Rs. 143.8 million into stocks. A few companies like Asian Life, National Life, IGI Prudential, Sanima GIC, and Prabhu Insurance saw a slight drop, but most insurers increased their stock holdings.
Insurance companies are asking for more flexibility to invest abroad as local investment options remain limited. Meanwhile, domestic stocks continue to attract more of their funds due to the falling bank interest rates and updated regulations.
