Insurance Companies Invest 80% of Fund in FD; Ignore Investment Guideline of IB

Sep 15, 2021 01:15 PM Merolagani

Insurance companies have ignored the direction of the Insurance Board (IB) to diversify their investment.

Despite the fact that the IB issued investment guidelines two years ago, the companies have not complied the directions given by the board regarding their investment.

As per the data published by the board regarding the investments, the companies have invested more than 80 percent of their fund in fixed deposits with banks and financial institutions.

In the last FY, life insurance companies invested Rs 343.39 billion, out of which, 82.14 percent i.e. 278.55 billion has been invested as FD with BFIs.

Similarly, non-life insurance invested Rs 63.39 billion during the period. Out of the total fund, they invested 89.30 percent i.e. Rs 46.71 billion as FD with BFIs.

As per the Investment Guideline, the companies should invest 5 percent on government bonds, 40 percent on FD of BFIs and Nepal Infrastructure Bank, 5 percent on real estate, 10 percent on ordinary shares of listed companies, 20 percent on preferential shares of BFIs, 20 percent on debenture of listed companies, 20 percent on agriculture, tourism and hydro infrastructure, 5 percent on mutual funds and CIT, 20 percent on FD of B level BFIs and 10 percent on FD of C level BFIs.

However, ignoring the guidelines, the companies have invested a huge chunk of their funds as FD in A-level BFIs. The companies invested only a petite percentage of their funds in all other sectors.

Apart from FD in A-listed companies, life insurance companies invested 9.20 percent in FD of development banks, 6.28 percent in debentures of the listed company, 5.33 percent in preferential shares and debentures of BFIs, 3.48 percent in stocks of listed companies, 0.91 percent in FD of finance companies, 0.90 percent in agriculture, tourism and hydro infrastructure, 00.93 percent in government bonds, 0.23  percent in mutual funds and CIT, 0.11 percent in real estate, 0.06 percent in FD of infrastructure bank and 1.90 percent in other sectors.

Similarly, non-life insurance invested 8.45 percent in FD of development banks, 2.45 percent in debentures of listed companies, 3.55 percent in preferential shares and debentures of BFIs, 3.96 percent in stocks of listed companies, 1.06  percent in FD of finance companies, 1.22 percent in agriculture, tourism and hydro infrastructure, 0.60 percent in government bonds, 0.89  percent in mutual funds and CIT, 0.08 percent in real estate, and 5.62 percent in other sectors.

 

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