Kathmandu, 13 Sep: The vandalism, arson, looting and property damage that occurred across the country during the Gen Z movement are expected to put a lot of pressure on the insurance sector. The vandalism, arson and looting that occurred in the main cities of the country including the federal capital Kathmandu on Monday and Tuesday are expected to result in the highest ever insurance claims due to damage to private, commercial and public property.
However, it has been found that government and public property is not insured. Due to this, it is seen that the state will have a huge financial burden. Singha Durbar, Prime Minister’s residence and office, President’s House, Parliament House, Minister’s residence, police offices in various places, various departments, offices under the provincial government, municipalities, wards.
Since government structures, including offices, are not covered by insurance, they are excluded from insurance claims, which has placed a direct financial burden on the state.
As private and commercial properties are insured by various companies, the financial burden of such losses will be reduced. The Nepal Insurance Authority has already directed the insurance companies to settle the insurance claims for the losses as soon as possible. The authority has issued such instructions by issuing a circular in the name of all non-life and small non-life insurers. However, due to the prohibition order and curfew, the claims and valuation have been affected as the insurance companies have not been able to work.
The Authority has directed to settle any claims arising from the adverse situation that has arisen in various parts of the country since Bhadra 23, keeping in mind the damage and inconvenience caused to the assets of the insured.
The authority has also directed that damage insurance claim details be submitted weekly (every Wednesday) in Excel spreadsheet format through Google Forms.
Billions of rupees have been damaged as protesters have destroyed many government infrastructures and many commercial structures in the private sector, from hotels, showrooms, supermarkets, media houses, industries, warehouses to private vehicles and private residences.
According to Birendra Baidwar, President of the Nepal Insurance Association, preparations are underway to issue a circular to all insurance companies to collect insurance claims and details of damage through the association. Insurance companies expect that claims will be received for insurance payments for insured properties including superstores in the capital city of Bhatbhateni, CG Park, Ncell, the completely damaged Hilton Hotel, various supermarkets, automobile showrooms, private residences, and private vehicles, in addition to the damaged government infrastructure.
According to a preliminary study by the Hotel Association of Nepal (HAN), 25 hotels, resorts, lodges and restaurants have suffered losses worth Rs 25 billion. There has also been a large amount of damage in the automobile sector. Based on this, the graph of losses and insurance claims seems to be high.
In particular, compensation is provided in such cases under riot risk insurance, but the pressure of large reinsured structures is on foreign reinsurers. Small insurance claims are the responsibility of the domestic insurance company. It is said that the insurance of the Hilton Hotel is with the Indian insurance company Oriental.
Riot Insurance through the Pool
Payments for this type of insurance, which falls under riot insurance, are made through the pool. Nepal Reinsurance Company operates it in collaboration with insurance companies through the pool system.
Under this risk, for damages up to Rs. 1 billion (100 crores), the concerned insurer is liable for 35 percent, while the remaining 65 percent falls under the responsibility of Nepal Reinsurance Company.
Surendra Thapa, Chief Executive Officer of Nepal Reinsurance Company, stated that data collection of damages caused by riots has already begun.
According to insurance expert Prof. Dr. Rabindra Ghimire, this provision is insufficient. He said that the current situation has become disastrous for the entire insurance sector, and it is time for stakeholders to rethink. Highlighting the sad reality that uninsured government structures ultimately burden the state, he remarked that it is ironic for government properties to remain uninsured despite awareness. He further noted that in the private sector as well, many structures remain uninsured except for major commercial properties.
More than the Earthquake
Due to the devastating earthquake of April 25, 2015 (2072 Baisakh 12), insurance claims worth Rs. 17.65 billion were filed from around 17,500 cases. According to Birendra Baidwar, President of the Insurers’ Association of Nepal, the current figure of claims is expected to surpass that amount.
Since people themselves are still prioritizing safety and have not yet reached insurance companies to file claims, companies are currently in the stage of collecting updates and information.
Pressure since COVID-19
With the onset of COVID-19 infections at the end of 2019 (2076 BS) and the introduction of COVID insurance from April 19, 2020 (2077 Baisakh 7), the insurance sector has been under immense pressure. Claims worth Rs. 11.34 billion from the general public for COVID-19 insurance remain unpaid, causing continuous criticism of the insurance industry.
Rs. 50 million from Royalist Protests
During similar protests in March last year in Tripureshwor and nearby areas of Kathmandu, non-life insurance companies received claims totaling Rs. 48.76 million for damages. Out of this, only Rs. 25.5 million has been paid.
Likewise, from continuous rainfall starting on September 26 last year, claims worth Rs. 12.27 billion were filed, but only Rs. 6.94 billion has been paid.
Riot Insurance in Debate
On September 1, 2004 (2061 Bhadra 16), after 12 Nepali workers in Iraq were brutally killed by the terrorist group Ansar al-Sunna, grief and anger brought Nepalis to the streets, resulting in widespread destruction that caused billions of rupees in losses to both private and public property. That incident had also sparked debate on foreign employment, property insurance, and riot insurance.
However, even now, the practice of property insurance and the establishment of an effective system remains weak. The same problem has reappeared during the 2015 earthquake and the recent riots.
