News of Insurance – Nepal Reinsurance Company, a state-owned reinsurer, is expected to receive one of the highest credit ratings in South Asia, making it an investment-grade reinsurance firm. The global rating agency AM Best is in the final stage of assigning a credit rating to Nepal Reinsurance.

According to sources, AM Best is likely to announce Nepal Reinsurance’s rating on March 1. This marks a significant milestone, as it is the first time the company is undergoing a rating assessment by an internationally recognized agency since its establishment over a decade ago.

Nepal’s lack of a sovereign credit rating had long delayed Nepal Reinsurance’s own rating process. Since the company is primarily state-owned, its credit rating is closely linked to the country’s sovereign rating. However, Nepal Reinsurance also has investments from private life and non-life insurers.

In December last year, Fitch Ratings classified Nepal as the second most investment-worthy country in South Asia, following India. Nepal received a ‘BB-’ (Double B Minus) sovereign credit rating from Fitch, which reflects a moderate credit risk.

For comparison, AM Best has assigned an ‘A-’ financial strength rating to India’s state-owned reinsurer, GIC Re, indicating strong financial stability. An ‘A’ rating, in contrast, would reflect even greater financial strength.

Nepal’s first-ever sovereign credit rating from Fitch placed it above the regional average, with only India having a higher rating. According to Fitch, all South Asian countries except Bhutan have been rated.

Nepal Reinsurance’s profitability has been supported by returns from investments, while its solvency margin remains healthy. Additionally, its investment portfolio is well-diversified and in compliance with regulatory requirements, ensuring sufficient liquidity. With the Nepalese government holding over 40% ownership, the company’s financial stability is considered strong compared to its regional peers.

Currently, Nepal Reinsurance has a paid-up capital of NPR 13.42 billion. However, as per the Nepal Insurance Authority’s directives, shareholders need to inject an additional NPR 6.58 billion to meet the required capital level.

If Nepal Reinsurance receives a strong credit rating, it will enhance its global credibility and open new avenues for investment and partnerships in the reinsurance sector.