Reinsurance in Nepal: The National Reinsurer, Cessions and Capacity

The number that tells you most about Nepali reinsurance is a ratio nobody publishes as a ratio. For the nine months to 13 April 2026, Nepal Reinsurance Company Limited earned gross premium of NPR 6,798,578,932 and retroceded NPR 961,059,003 of it. It kept about 86 percent of what it took on.

A national reinsurer retaining that share of its book is doing something specific. It is functioning as a balance sheet that absorbs domestic risk rather than as a conduit that passes domestic risk to the international market. Whether that is prudent depends entirely on whether the retained exposures are correlated. In Nepal they are.

What Nepal Re is

Nepal Re was incorporated on 7 November 2014 under the Companies Act 2063 (2006) and inaugurated on 22 December 2014. It succeeded an insurance pool established in 2003 to cover damage caused by terrorism, a mechanism created because during the conflict the ordinary market would not write the risk. That origin is worth remembering when reading its current role. The institution was created to hold what the private market declined.

Its capital is public. Authorised capital is NPR 15 billion; issued and paid-up capital is NPR 13,422,187,100. The Government of Nepal holds 44.04 percent through the Ministry of Finance’s public debt holding, insurance companies and financial institutions hold 39.96 percent, and the general public holds 16.00 percent. The largest private holders are themselves insurers: Himalayan Life Insurance at 7.25 percent, Asian Life Insurance at 3.83 percent, Sagarmatha Lumbini Insurance at 3.24 percent.

That ownership structure creates a loop. The insurers that cede risk upward are shareholders in the entity receiving it. A loss large enough to impair the reinsurer impairs the ceding insurers twice over, through their own retained share and through the value of their shareholding. Any stress test of Nepali insurance that treats the reinsurance recovery as a clean external asset is understating correlation.

The compulsory cession

Nepal is widely described as operating a compulsory cession, under which a fixed proportion of every risk written by a Nepali insurer must be offered to, or placed with, the national reinsurer. The mechanism is a common one in markets that want to retain premium domestically and build a national balance sheet, and Nepal Re’s premium scale relative to the size of the primary market is consistent with a substantial mandatory inflow.

We are not going to state the percentage. The requirement, if it exists in the form generally described, is imposed by the Nepal Insurance Authority, and the Authority’s website could not be opened during research for this article because its TLS certificate chain fails verification. Nepal Re’s own public pages do not state it. Percentages appear in unsourced secondary commentary and we will not launder them through a citation.

This is a material gap and it should be treated as one. The cession percentage determines how much of a Nepali insurer’s premium it never really controls, how much of its underwriting result is determined by another entity’s pricing, and how much of the market’s aggregate exposure sits in a single institution.

Where capacity is constrained

Nepal Re reports a solvency ratio of 3.65 against a stated regulatory requirement of 1.5 times. It appropriates 10 percent of distributable profit each year to a catastrophe reserve under Authority requirements. On the numbers it publishes, it has substantial headroom.

So when a Nepali risk manager is told that capacity for a large project is short, the shortage sits somewhere other than the reinsurer’s balance sheet. Three places are plausible.

The first is retrocession appetite. Nepal Re retroceded under a billion rupees of premium in nine months. That is the volume of Nepali risk leaving the country through the national reinsurer, though primary insurers may also place cover directly abroad. International reinsurers pricing Himalayan seismic and glacial-lake-outburst exposure are pricing a peril they have limited loss history for, in a jurisdiction whose loss adjustment takes many months, and their appetite is the binding constraint on peak risks.

The second is the approved-counterparty list. Nepal Re states that its retrocession programme is arranged on the basis of Authority directives, and it publishes annually a list of reinsurance brokers through which retrocession may be placed, most recently for FY 2083/84 (2026/27). Where the regulator specifies the channel, the available market is smaller than the global market.

The third is accumulation control. A reinsurer with a high retention in a small country accumulates exposure by geography faster than by line of business. The relevant question for a developer seeking cover on a Himalayan hydropower scheme is how much exposure the reinsurer already carries in the same river basin. Capital is the easy part of that answer.

How a large Nepali risk is placed

The sequence for a risk too large for one insurer runs roughly as follows, and each step narrows the market.

The insured, usually through a broker, approaches a lead insurer, which underwrites and sets terms. Because no single Nepali balance sheet can hold the risk, other domestic insurers take shares as co-insurers on the lead’s terms. The lead then cedes upward: the compulsory element to Nepal Re, and the balance under treaty and facultative reinsurance arrangements. Nepal Re in turn retrocedes, through brokers on its approved list, into the international market.

Two things follow that a risk manager should understand before signing.

The policy the insured holds is issued by the lead, but the security behind it is a chain, and the insured has no contractual relationship with anyone beyond the front. If a link fails, the insured’s claim is still against the front, which is a legal comfort and not a liquidity one.

And the terms available at renewal are set several steps upstream. A hardening in international retrocession pricing reaches a Nepali hotel or hydropower developer with a lag: through Nepal Re’s retrocession cost, through treaty terms offered to the primary market, and finally through the quotation. Buyers who watch only their own renewal are seeing the last stage of a movement that began a year earlier.

The 2025 loss event

The events of 23 and 24 Bhadra 2082 (8 and 9 September 2025) produced a mass property loss. Nepal Re published a notice on 31 Shrawan 2083 confirming that it had paid ceding insurers billions of rupees and was continuing to settle claims as a priority. Eleven months after the event, the process was still described as ongoing.

Two things are demonstrated. The reinsurance chain worked, in that money moved from the reinsurer to the primary insurers, which is what the structure exists to do. And the timescale was long, which is the risk a business carrying a Nepali policy actually bears. Cover that responds is not the same as liquidity that arrives.

What to establish first

Anyone underwriting, financing or insuring a large Nepali asset should get three things in writing from their broker. The compulsory cession percentage and the instrument imposing it. The reinsurance and retrocession structure standing behind the specific policy, including whether any part of it depends on capacity that renews annually. And the claims history of the ceding insurer on losses of comparable size. The last of those is the only one you can test against evidence rather than intention.

Sources

1. Unaudited financial statements for the third quarter of FY 2082/83, ended 30 Chaitra 2082

   Nepal Reinsurance Company Limited · Quarter ended 30 Chaitra 2082 (13 April 2026) · Tier 4 — Audited disclosure / filing

   Supports: Gross earned premium of NPR 6,798,578,932, premiums ceded of NPR 961,059,003, net earned premium of NPR 5,837,519,929, share capital of NPR 13,422,187,078, a solvency ratio of 3.65 against a requirement of 1.5 times, a catastrophe reserve appropriation of 10 percent of distributable profit annually, and that the retrocession programme is arranged on the basis of Nepal Insurance Authority directives.

   Accessed 26 August 2026

2. Establishment

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

   Supports: Incorporation on 7 November 2014 under the Companies Act 2006, inauguration on 22 December 2014, and status as successor to the insurance pool established in 2003 to cover damage caused by terrorism.

   Accessed 26 August 2026

3. Capital Structure

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

   Supports: Authorised capital of NPR 15 billion, issued and paid-up capital of NPR 13,422,187,100, and ownership of 44.04 percent 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, with Himalayan Life Insurance at 7.25 percent, Asian Life Insurance at 3.83 percent and Sagarmatha Lumbini Insurance at 3.24 percent.

   Accessed 26 August 2026

4. List of Reinsurance Brokers for Retrocession 2083-84 (2026-27)

   Nepal Reinsurance Company Limited · FY 2083/84 (2026/27) · Tier 4 — Audited disclosure / filing

   Supports: That Nepal Re publishes an approved list of reinsurance brokers through which its retrocession may be placed, revised annually.

   Accessed 26 August 2026

5. Notice on settlement of claims arising from the events of 23-24 Bhadra 2082

   Nepal Reinsurance Company Limited · 31 Shrawan 2083 (mid-August 2026) · Tier 4 — Audited disclosure / filing

   Supports: That the reinsurer had paid ceding insurers billions of rupees for that loss event and was continuing to settle claims eleven months after it.

   Accessed 26 August 2026