Licensing an Insurer and the Limits on Foreign Participation

Ask a foreign insurer what it needs to do to write business in Nepal and the honest first answer is a question back. Are you trying to obtain a licence, or acquire one? The two paths run through different institutions, take different lengths of time, and have very different prospects of success in the current regulatory climate.

The two consents

Nepal treats the money and the activity as separate regulatory questions.

The money is governed by the Foreign Investment and Technology Transfer Act 2075 (2019), amended in March 2025 by the omnibus act that also touched the Companies Act 2063 (2006), the Industrial Enterprises Act 2076 (2020), the Special Economic Zone Act 2073 (2016), the Arbitration Act 2055 (1999) and the Foreign Exchange (Regulation) Act. Under FITTA an approval is granted for a named investor, a named Nepali company, a stated amount and a stated activity. Which body grants it depends on size and sector: see which approval route applies and, for sectors that are closed or capped, the negative list.

The activity is governed by the Insurance Act 2079 (2022) and licensed by the Nepal Insurance Authority. The Authority decides whether a company may write insurance at all, in which class, on what capital, under what governance and with which people in control.

Neither consent substitutes for the other, and neither body is bound by the other’s decision. An investment approval does not oblige the Authority to licence, and a licence does not authorise a foreign shareholder to inject capital without the FITTA approval and the Nepal Rastra Bank recording that follows it. The full inbound sequence, and why the record made at inflow governs everything that happens at exit, is set out in cross-border money.

The sequencing problem

A FITTA approval is granted to put money into a company. An insurer licence is granted to a company that satisfies capital, governance and systems requirements. Each is waiting on the other. The company must be capitalised to be licensable, and the capital cannot lawfully arrive from abroad until the investment is approved for a company that exists and has a stated purpose.

Practitioners resolve this by incorporating first, obtaining the FITTA approval for the incorporated vehicle, funding it, and only then presenting a capitalised applicant to the Authority. The risk in that order is obvious. The money is in the country and committed to an activity the regulator has not yet permitted. We could identify no bridging mechanism that lets an applicant hold approved-but-uncommitted capital pending a licence decision.

Licensing versus acquisition

The Insurance Act 2079 arrived with a regulator that had been given wider capital-setting powers, and the Authority used them immediately. Minimum paid-up capital was raised and a compliance deadline attached, and the response through 2022 and 2023 was a merger wave that reduced the number of licensed life and non-life insurers. That was the policy objective.

A new-licence application submitted into that environment is asking the Authority to add to a population it has spent three years reducing. We are not aware of a published moratorium, and we do not assert one. The point is narrower. An entrant should test whether the Authority is licensing at all before designing a structure that depends on it.

The alternative is acquisition. Most Nepali insurers are listed on the Nepal Stock Exchange, which trades separate life and non-life sub-indices, so there is a visible market in insurance equity and a public price for it. Buying a stake converts the problem from licensing into change of control: the Authority’s consent to a significant shareholder, the FITTA approval for the acquisition of shares by a foreign investor, the share transfer mechanics under the Companies Act, and the exchange and Securities Board of Nepal requirements that attach to any substantial acquisition in a listed company.

What an acquirer buys

A stake in a Nepali insurer is four assets bundled together, and they diligence separately.

The licence is the scarce one, and the reason acquisition is the realistic route.

The book is the risky one. A non-life book in Nepal is concentrated by geography rather than by line, so the relevant exercise is mapping accumulation by river basin and by district, not counting policies by class.

The distribution network is the durable one. Product wordings and pricing are approved by the regulator and converge, and investment allocation is directed, so what is left to distinguish insurers is reach and claims service.

The integration debt is the one acquirers underprice. Most Nepali insurers of any size are themselves the product of a 2022 or 2023 merger, so the target has already absorbed another company’s systems, reserving practice and agency force. A buyer in 2026 is acquiring the second integration, not the first.

What we could not verify

Three things a prospective entrant needs are missing from this article.

The licence classes and their minimum paid-up capital. These are set by Authority instruments. The Authority’s website could not be retrieved on 26 August 2026, because the certificate chain on nia.gov.np fails verification, which blocks retrieval of every directive and circular hosted there. Capital figures that circulate in secondary commentary are largely pre-consolidation, and reproducing them would mislead in the specific direction that matters most, understating the requirement.

The foreign ownership cap. A ceiling on foreign shareholding in Nepali insurers is widely referred to. We could not obtain it from the statute, from an Authority directive, from the negative list schedule or from a gazette notice, and the figures asserted in unsourced commentary are not consistent with each other. An entrant should treat this as the first item to confirm in writing with the Authority, because it determines whether the transaction is a control acquisition or a minority position with a shareholders’ agreement doing the work. What such an agreement can and cannot achieve in Nepal is covered in shareholder agreements and joint ventures.

The fit and proper standards and the processing time. Both are Authority material, and both sit on the same unreachable domain.

The market an entrant joins

The reinsurance layer is closed in practice. Nepal Reinsurance Company Limited, the domestic reinsurer, is 44.04 percent owned by the Government of Nepal through the Ministry of Finance, 39.96 percent by insurance companies and financial institutions, and 16.00 percent by the general public. There is no foreign shareholder. An entrant seeking reinsurance exposure to Nepali risk is looking at inward reinsurance and retrocession relationships rather than equity.

The primary market is where foreign participation would sit, and it is a market of listed companies whose shares reprice on catastrophe news. On 26 August 2026 the non-life sub-index fell 3.90 percent on reports of flood damage to insured hydropower projects, against a 1.38 percent fall in the headline index. Any valuation of a Nepali non-life insurer has to price a portfolio concentrated in the same river valleys, and any due diligence has to look through the aggregate premium figure to the catastrophe accumulation behind it.

The first question to put to the Authority, before any of the commercial work, is whether a licence in the intended class is available at all.

Sources

1. Capital Structure

   Nepal Reinsurance Company Limited · Undated page, retrieved 26 August 2026 · Tier 4 — Audited disclosure / filing

   Supports: The ownership composition of the domestic reinsurer and the absence of foreign shareholders in it.

   Accessed 26 August 2026

2. Insurance Related Documents — including 'Insurance act, 2079'

   Nepal Reinsurance Company Limited · Undated download index, retrieved 26 August 2026 · Tier 2 — Official publication

   Supports: That the Insurance Act 2079 is the operative licensing statute relied on by a regulated Nepali reinsurer.

   Accessed 26 August 2026

3. Rasuwa floods weigh on Nepal's stock market as hydropower, insurers slide

   The Kathmandu Post · 26 August 2026 · Tier 6 — Professional or news source

   Supports: That life and non-life insurers are listed and trade in dedicated sub-indices on the Nepal Stock Exchange, which is the practical route by which a stake in a Nepali insurer is bought or sold.

   Accessed 26 August 2026

4. Companies Act, 2063 (2006), consolidated text incorporating amendments to 2081.12.18 (31 March 2025)

   Office of the Company Registrar, Government of Nepal · Consolidated text as amended by the Economic and Commercial Environment Improvement and Investment Facilitation (Amendment of Some Nepal Acts) Act, 2081 · Tier 1 — Primary legal instrument

   Supports: That share transfer restrictions are a matter for the memorandum and articles under sections 18(1)(f) and 20(2)(j), and that the Act was last amended by the 2081 omnibus act.

   Accessed 26 August 2026