KATHMANDU, Sept 12: Everest Insurance has put itself on a collision course with the insurance sector regulator citing it has started considering various options, including shutting down the business for good, following introduction of the latest corporate governance directive that has seriously hurt its business interests.
The non-life insurer, which recently faced regulatory action for extending excess advance payment against an insurance claim filed by a company owned by one of its promoters, has been complaining ever since the Board came up with a directive last month, which, among others, bars any insurance company from selling policies to firms or individuals having direct relation with its promoters.
“This provision has made it difficult for us to do business. We are considering on working as a consultant for the insurance sector or shutting down the entire business,” a board director of the company told Republica on condition of anonymity.
The company, which is promoted by industrialists like Rajendra Khetan, Prem Prakash Khetan, Ratan Lal Shanghai and Niranjan Tibrewala, among others, is getting a huge chunk of business from its own promoters, who have divergent business interests.
But with the regulator´s latest instruction, the company was left with only two options of transferring all business generated by its promoters to other insurance companies or asking the promoters to sell their stakes in the company.
“Selling our stakes is still an option but if we transfer all our business to other companies, it will be difficult for us to operate,” the board director said, without mentioning how much promoters were contributing to the company´s revenue.
The Insurance Board has, however, said it will not back away from its decision due to complaint made by one company as this practice of getting business from promoters was triggering unhealthy competition in the insurance sector.
“Because of such practice, many companies are least considerate about settling claims of the general public,” the Board´s source said.
An example of this was set by Everest Insurance itself in the third quarter of last fiscal year, when it reported 3,531 unsettled claims worth Rs 464.17 million - the highest in the non-life insurance sector at that time.
Although the company has lately made some improvements in this regard, it still needs to put in a lot of effort to change the situation.
“We were doing our best to improve our performance, but the regulator´s latest directive has thrown everything in disarray,” a high-ranking official of the company told Republica on condition of anonymity. “There are so many issues that need to be settled.”
As the ban on generation of business from promoters was “crippling the company”, the compulsion to meet another regulatory requirement of raising paid-up capital to Rs 250 million by mid-July next year from existing Rs 100 million has added salt to injury, the official said.
“On one hand, we are losing business, while, on the other, we are being asked to raise the capital. In such circumstance, how can we survive and how can we give dividend to our shareholders,” the board director wondered.
Another problem faced by the company is the ban put on board director of one company to assume the same position in another company. As per this instruction, board directors of the company, including Rajendra Khetan, Prem Prakash Khetan and Ratan Lal Shanghai, have to either leave Everest Insurance or Prime Life Insurance, in which they also hold the same position.
Besides, the directive also prevents more than one member of a family from assuming post of board director in the same company, which will force either Rajendra Khetan or Prem Prakash Khetan to leave their posts.
“There are so many things which have created confusion,” the board director said.
The Insurance Board, which has not received any official information on closure, has said shutting down a public company like Everest is not an easy task and such a decision should be taken by the general body meeting of the company.