BEYOND NUMBERS
O ver the last decade, Nepal’s business and financial landscape has changed considerably; markets have expanded, regulations have become more structured, technology has transformed the way businesses operate, and customer expectations have evolved. The insurance industry has travelled through this transformation as well, growing not only in size but also in the way companies are governed and structured.
Further growth, however, cannot be driven by numbers alone. Sustainable progress will depend on how effectively we strengthen our organisations, enhance capabilities within the sector and create an enabling environment that promotes wider access to insurance and greater financial protection.
People at the Centre of Institutional Strength
The way organisations are led and managed has evolved considerably over the years. Organisations can no longer rely only on traditional hierarchy, established processes and institutional legacy. They must be agile, accountable,
technology-enabled and capable of responding to changing customer expectations, business conditions and regulatory requirements. This has placed human capital at the centre of organisational growth and resilience.
One of the most significant changes has been the evolving role of human resources. Traditionally, HR was largely viewed as an administrative function, with limited involvement in business planning or organisational decision-making. Today, that role has changed considerably. HR is increasingly expected to understand the capabilities an organisation has, identify the gaps that exist and prepare people for the roles and responsibilities the organisation will require in the future. As businesses become more data-driven and risk-conscious, the capabilities required by employees are also evolving. Competency mapping, performance management, succession planning and leadership development therefore need to become an integral part of organisational planning rather than isolated HR activities.
HR is therefore no longer simply a support function; it has become a strategic driver of organisational capability.
Building capability, however, goes beyond developing individual skills. It is equally important to institutionalise the organisation itself. A strong organisation should not be overly dependent on a particular leader or a small group of individuals. It should be built on sound systems, clear structures, capable teams and values that remain consistent even as leadership changes.
This requires responsibility and decision-making to be developed across the organisation. People need to be trusted with responsibility, held accountable for outcomes and given opportunities to take ownership. I believe the role of leadership is not only
to provide direction but also to create an environment in which capable people have the support and space to perform, make decisions and grow. Over time, this develops leadership capability across the organisation rather than concentrated at the top.
The real strength of an institution is its ability to remain stable, perform consistently and continue to grow beyond any one individual.
An Industry Moving Beyond Scale
The importance of institutional capability becomes even more evident when we look at the transformation of the insurance industry itself. Over the past decade and half, Nepal’s insurance sector has expanded significantly in terms of business volume, customer reach and market presence, while moving towards stronger governance, capital adequacy, risk management and financial reporting.
In Fiscal Year 2082/83, life insurers collected approximately Rs. 204.5 billion in gross premiums, an increase of around 12% over the previous year. Despite this expansion, coverage through core life insurance plans remains at around 18%. The contrast is important. It demonstrates how far the industry has progressed while also highlighting the considerable opportunity that remains to extend meaningful financial protection to a broader segment of the population.
Greater coverage cannot come from distribution alone. Financial literacy and public awareness of insurance protection must improve alongside market expansion. Customers who better understand financial risk and the value of protection are better positioned to make informed decisions. The industry’s responsibility must therefore extend beyond distribution to awareness, education, trust and customer engagement.
Technology is another important
part of this transition. Digitalisation should not simply mean moving existing processes online. Its real value lies in improving productivity, reducing operating costs and making the customer experience faster and more efficient. For customers, this should ultimately be translated into product/service that is simpler, more accessible and more efficient.
At the same time, the regulatory and institutional framework of the sector continues to evolve. Risk-Based Capital (RBC), Own Risk and Solvency Assessment (ORSA), evolving financial- reporting standards, Nepal Financial Reporting Standards (NFRS) 17 and stronger governance requirements are changing how insurers assess risk, allocate capital and plan for the long term. Stronger frameworks, however, also require stronger capabilities.
Capacity building must advance at the same pace as regulatory reform.
Creating an Enabling Environment for Growth
The industry’s ability to realise its full potential, however, does not depend on insurers alone. It is also shaped by the broader economic and policy environment in which they operate. Economic growth, household income, employment, interest rates, taxation and fiscal policy all influence the ability and willingness of individuals to secure adequate financial protection. A supportive economic environment must therefore be accompanied by an enabling and predictable policy framework.
One significant development in recent years has been the declining interest-rate environment. Nepal Rastra Bank reported the weighted- average deposit rate of commercial banks at 3.29% based on 11-months data for FY2025/26. Changes in interest rates have implications not only for household financial decisions but also
for institutional investors such as life insurers, which manage long-term liabilities and require appropriate long- duration investment opportunities. This highlights the need for a wider range of secure and suitable long-term investment avenues available to institutional investors.
At the household level, recent changes in the personal income taxation are a positive development. Under the revised tax structure for FY 2083/84, the income threshold subject to the lowest tax rate of 1% has been increased to Rs. 10 lakhs, significantly reducing the tax burden for many individuals. This provides people with greater disposable income and, consequently, greater capacity to allocate resources towards financial protection and other long-term financial needs. For the insurance industry, the opportunity is to translate that additional capacity into greater awareness and meaningful financial protection.
The tax framework applicable to insurers also deserves continued discussion. While the corporate tax rate for life insurers stands at 25%, the effective burden is considerably much higher due to the disallowance of policyholder claims and bonuses paid as deductible expenses while computing tax rate. At the individual level, the allowable deduction for insurance premium while calculating taxable income currently stands at Rs. 40,000. The industry had proposed increasing this limit to Rs. 100,000 to encourage greater financial penetration and protection. The industry had expected the recent budget to address these concerns by providing greater clarity and
rationalisation in the tax framework in line with the international practices and an increase in the allowable deduction for insurance premium. The fact that these expectations were not addressed, the opportunity for reform has effectively moved into another fiscal cycle.
Reinsurance policy is another area that requires careful consideration, particularly from the perspective of risk concentration. Recent events have once again highlighted the scale and nature of risks the country can face, reinforcing the importance of adequate risk capacity and wider diversification. While the recent budget has partially addressed this, the requirement to place at least 20% with Nepal Reinsurance Company makes it important to maintain an appropriate balance between domestic capacity and wider risk diversification. Engagement with established international reinsurers is also important not only for diversifying risk, but also for bringing global expertise, technical knowledge and international practices into the domestic insurance industry.
The larger issue is the need for policy to keep pace with the changing realities of business. As industries become more structured, regulated and technically demanding, fiscal and regulatory frameworks must evolve with them. Government facilitation is equally important in creating an enabling environment for the sector. Expanding the range of secure and appropriate investment opportunities would allow insurers to manage their long-term funds more effectively while also enabling institutional capital to contribute to productive sectors of the
economy and national development. Equally important is stable regulatory leadership for timely and consistent policy decisions. Leadership gaps or prolonged transitions within key institutions can delay policy discussions, regulatory decisions and sectoral reforms. For businesses operating in a highly regulated environment, such delays create uncertainty and can affect long-term planning.
As the regulatory environment becomes increasingly risk-based and technically demanding, continuous engagement among the government, regulator and industry becomes essential, it should create a structured mechanism through which policy objectives, implementation challenges and emerging risks can be discussed and addressed in a timely manner.
Building for What Comes Next
Looking ahead, the coming days will increasingly be shaped by data, technology, professional capability and disciplined management. For insurance, these changes will need to be accompanied by deeper financial awareness, stronger institutions and a regulatory environment that supports responsible and sustainable growth. The opportunity ahead is significant, but growth in itself should not be the only measure of progress. We should be building organisations that can withstand change, developing professionals who can lead the next generation, and creating an ecosystem that can provide meaningful protection across a broader section of society.
For organisations, this means investing continuously in people and institutional capability. For the industry, it means embracing stronger governance, risk management, technology and innovation. For policymakers and regulators, it means providing predictability, timely decision-making and an enabling environment in which the sector can fulfil its long-term role in line with the spirit of the government.
(Parajuli is CEO of Nepal Life Insurance Company)
