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It can’t get better than this! If you think that the insurance sector or the entire market may not rebound anytime soon, you better change your mind. Just when the insurance companies have been suffering badly due to rumors about institutional investors squaring off their investment in insurance stocks, the Insurance Board is about to come up with a new policy to expand companies investment in the stock market.

“The new investment policy expected to be endorsed by the regulatory board soon will allow the insurance companies to invest up to 15 percent of their investable capital in the stock market, up from the existing 5 percent,” a highly placed source at the Insurance Board told ShareSansar.  “Among other things, the new policy will go a long way to give depth and stability to the stock market.”

As the insurance companies in operation have an investable capital of around Rs 80 arba, they can soon invest Rs 12 arba in the stock market. The Insurance Board is expected to endorse the new policy within a few days. Though the proposed new policy states that the limit for the investment in the stock market has been expanded to 10 percent from the existing 5 percent for the companies under class ‘B’, it may also be noted that the new policy does not change the existing provision of allowing the class ‘A’ companies to invest 5 percent. Hence, the insurance companies can invest up to 15 percent in the stock market.

But the insurance companies can only invest in the stocks of BFIs, hotels and hydropower companies. “Once this provision comes into effect, it will have a very good impact on overall the stock market,” says Raj Kumar Timilsina, chairman of Nepal Investors’ Forum Nepal. Another good news for those banking on the insurance stocks is that the class ‘B’ companies can now also invest 5 percent from their investment fund in infrastructure sector. The new provision is being implemented as part of the existing provision that allowed the companies to mobilize 25 percent of the fund to invest in sectors such as hydropower, tourism, agriculture, education and health. 

It is interesting to note that the insurance companies can also directly invest in promoter shares of the companies in infrastructure sector. Though these companies were allowed to invest 25 percent of the total investable fund, the investment was largely limited to government bonds and bank deposits. So far the companies have been investing 75 percent of their total fund – 25 percent in government bonds, 35 percent in bank deposit and 5 percent in mutual funds.