Himalayan Reinsurance faces cascading crises as regulators tighten oversight

KATHMANDU: Nepal’s reinsurance sector is facing one of its most turbulent phases in recent years, with Himalayan Reinsurance Limited at the center of mounting institutional, regulatory, and reputational challenges. A series of developments—ranging from the arrest of a key shareholder on money laundering charges to mass resignations at the board level—has placed the company under intense scrutiny, raising concerns across Nepal’s insurance and financial markets.

Arrest of key shareholder triggers systemic shock

The crisis escalated sharply following the arrest of founding shareholder Deepak Bhatt, who is currently in police custody as part of an ongoing investigation into alleged violations under Nepal’s anti-money laundering framework.

According to the Department of Money Laundering Investigation, Bhatt is accused of acquiring shares worth over NPR 3.81 billion through questionable financial channels. Investigators claim that the investments span multiple financial instruments and entities, including:

• Approximately NPR 2.73 billion in Himalayan Reinsurance shares
• NPR 221.9 million via Himalayan Securities
• Around NPR 370 million through a subsidiary linked to Nepal Life Insurance
• NPR 251.4 million in an HLI Large Cap Fund
• NPR 161.7 million in Nepal Micro Insurance

Authorities are now probing whether these transactions constitute proceeds of illicit financial activity or involve misuse of the insurance ecosystem.

Expanding investigation and corporate fallout

Bhatt’s arrest has had a ripple effect. Other high-profile investors and business figures have also come under investigation, including individuals linked to the Shankar Group, notably Sulabh Agrawal.

Within the company, the governance structure has undergone an abrupt and unprecedented shake-up. Chairman Shekhar Golchha resigned first, with his exit formally approved by the board shortly thereafter. His resignation triggered a chain reaction, with multiple board members—including Shahil Agrawal, Rohit Gupta, Amit More, Rajiv More, Shubheksha Kharel, and Subhash Kumar Jhunjhunwala—stepping down in quick succession.

This wave of resignations has effectively reset the board, leading to a complete restructuring. Uday Kumar Niraula has been appointed as the new chairman until the next Annual General Meeting, alongside newly inducted directors Dipendra Kumar Mishra, Prithviraj Thapa, Deepak Kumar Mishra, and Ashish Chandra Neupane.

Industry observers describe the wholesale replacement of the board as an “extraordinary governance event,” rarely seen in Nepal’s corporate history.

Leadership vacuum deepens uncertainty

Compounding governance concerns is the absence of CEO Upasana Poudel, who is currently undergoing medical treatment in India following complications related to a blood clot in the brain. Her continued absence has raised questions about executive continuity at a time when the company is navigating multiple crises.

Sources within the company maintain that operations remain stable and that internal instructions emphasize uninterrupted service delivery. However, the convergence of board-level exits and executive absence has inevitably affected strategic decision-making and operational confidence.

Reinsurance obligations under strain

The situation is further complicated by emerging concerns over reinsurance claim settlements. Under Nepal government policy, insurance companies are required to cede at least 10 percent of their reinsurance portfolio to domestic reinsurers, including Himalayan Reinsurance.

As a result, nearly all insurance companies in Nepal have exposure to Himalayan Re’s financial and operational performance. Any disruption in claim settlements could have systemic implications for the broader insurance sector.

Industry experts warn that reinsurance is fundamentally a trust-based business, heavily reliant on credibility and international partnerships. Prolonged instability could therefore impact not only domestic operations but also Nepal’s standing in global reinsurance markets.

Regulator steps in with intensified monitoring

The Nepal Insurance Authority has significantly escalated its oversight of the company following recent developments.

While the regulator had already been monitoring Himalayan Re—particularly after its involvement in a controversial reinsurance arrangement linked to the Hilton Kathmandu—the current situation has prompted stricter supervision.

In that earlier case, the authority fined the company NPR 200,000 for violations related to “riot and terrorism risk” reinsurance management, citing non-compliance with directives and regulatory norms.

More recently, the authority has:

• Sought formal clarification from five senior executives, including the CEO, Deputy CEO Mukesh Kumar Kapur, and executive directors Manish Kumar, Shishir Gaire, and Santosh KC
• Initiated daily on-site inspections, with regulatory teams visiting the company for ongoing monitoring
• Directed a detailed investigation into potential financial irregularities

Officials stress that the request for clarification is part of standard administrative procedure and does not imply immediate punitive action.

Speculation over ‘problematic insurer’ designation

Amid growing uncertainty, market rumors have suggested that regulators may declare Himalayan Re a “problematic insurer.” These reports triggered volatility in the company’s stock price, which fell to around NPR 665 per share—down approximately 41 percent from its yearly high of NPR 1,140.

However, the regulator has dismissed such speculation. According to spokesperson Pujan Dhungel, no formal discussion has taken place regarding such a designation.

Under Nepal’s Insurance Act 2022 (2079 BS), regulators are empowered to declare an insurer problematic if it fails to maintain minimum capital requirements, solvency margins, or if its founding shareholders are found guilty of serious financial crimes such as fraud, money laundering, or corruption.

Financials remain stable—for now

Despite governance and regulatory turbulence, the company’s financial indicators remain relatively stable in the short term.

According to its second-quarter report:

• Net profit rose to NPR 647.4 million in the first six months of the current fiscal year, up from NPR 616.9 million a year earlier
• Total business increased by 31.3 percent to NPR 3.29 billion
• Total income grew by 22.26 percent to NPR 3.71 billion
• Earnings per share improved marginally to NPR 11.92
• Net worth per share stands at NPR 159.02

The company maintains a paid-up capital of NPR 10.86 billion, with reserves including NPR 1.19 billion in special reserves and NPR 239.7 million in catastrophe funds.

Balancing crisis and continuity

Company insiders insist that operational activities remain unaffected and that reinsurance claim settlements are ongoing. They also highlight progress in resolving long-pending reconciliation issues that had remained unaddressed for nearly a decade.

However, the broader challenge lies in perception. With international linkages integral to reinsurance, ongoing controversies risk undermining confidence among global partners.

Stakeholders across Nepal’s financial ecosystem are now closely watching how regulators, management, and shareholders navigate the crisis. The coming months are expected to be critical in determining whether Himalayan Reinsurance can stabilize its governance, restore credibility, and sustain its role in Nepal’s evolving insurance landscape.