Millions flow abroad annually for actuarial valuation as Nepal fails to produce insurance actuaries

KATHMANDU: Despite a legal mandate under the Insurance Act 2022 (2079 BS) requiring every insurance company in Nepal to conduct annual actuarial valuation, the country still does not have a single licensed actuary. As a result, millions of rupees continue to flow abroad each year to pay foreign experts, with the government and regulatory authorities showing little urgency to build in-country capacity for this critical financial function.

Under Nepal’s current regulatory framework, the Insurance Board mandates insurers to engage certified actuaries to assess long-term liabilities, premium structures, and solvency positions. However, with zero domestically qualified actuaries, insurers remain dependent on professionals from India, Sri Lanka, and other countries — a costly and often delayed process that creates operational and financial bottlenecks.

Foreign Dependence, High Costs, and Delayed Reporting

Insurance companies say they face repeated delays in receiving valuation reports, which in turn postpone the preparation of financial statements and the holding of annual general meetings (AGMs). Protective Micro Insurance CEO Naresh Kumar Roka highlighted that limited actuary availability in India further compounds delays for Nepali companies.

“By law, we must complete audits within three months and hold AGMs within four months, but actuary delays make this nearly impossible,” Roka told Fiscal Nepal.

Guardian Micro Life Insurance CEO Chirayu Bhandari said foreign actuaries often charge arbitrary, high fees that Nepali companies must pay to avoid non-compliance. Indian actuaries remain the preferred option due to proximity and ease of coordination, but demand from larger foreign markets often sidelines Nepali clients.

The financial burden is substantial. Industry insiders estimate that collectively, Nepal’s insurance sector spends tens of millions of rupees annually on foreign actuary services — an outflow that could be retained domestically if a local talent pipeline were in place.

Regulator Acknowledges Gap but Offers No Clear Timeline

Insurance Board Executive Director Sushil Dev Subedi confirmed that actuarial science courses have only recently started in Nepal and that it will take years before qualified professionals emerge.

Even if Nepal trains actuaries, retaining them could be difficult. “Graduates in this field often prefer to work abroad. We will need strong retention policies to keep them in the country,” Subedi said.

The Board has directed companies to hire at least one actuarial analyst — often a student who has passed at least three professional exams — but these analysts cannot independently sign off on valuations. Professional certification must come from internationally recognized bodies in India, the UK, or the US.

Rising Scope, Delayed Capacity

Nepal Insurance CFO Umesh Awasthi noted that actuarial valuation requirements only became strict from last fiscal year. Prior to that, insurers could submit limited data to foreign actuaries, but now they must provide detailed datasets for solvency calculations, which has lengthened processing time.

With Nepal opening actuarial science programs at Tribhuvan University, the sector hopes for a gradual reduction in dependency. However, until full-fledged actuaries emerge and are retained locally, the sector will remain exposed to the risks of foreign reliance.

What is an Actuary and Why it Matters

An actuary is a certified professional who applies mathematics, statistics, and financial theory to evaluate insurance risks, determine premium levels, and project long-term liabilities. Comparable to chartered accountants in their specialized domain, actuaries are essential for ensuring the financial stability of insurance companies and protecting policyholders’ interests.

Globally, actuarial valuation has become a standard practice to ensure transparency and comparability of financial statements. In Nepal, its adoption is meant to align the sector with international benchmarks, prevent manipulation of financial data, and enable fair competition with foreign insurers.

As Awasthi explained, “Actuarial valuation creates a uniform accounting standard worldwide. Whether done in the US, India, or Nepal, the results are consistent — leaving no room for arbitrary adjustments.”

Strategic Imperative for Nepal’s Financial Sector

Industry experts warn that without urgent investment in actuarial education and retention strategies, Nepal’s insurance sector will continue hemorrhaging foreign currency, face delayed reporting cycles, and risk credibility in global financial markets.

With the government targeting increased insurance penetration and financial sector modernization, bridging the actuarial talent gap has become both an economic and strategic necessity. Until then, Nepal’s insurers remain trapped in a cycle of dependency — paying high fees to foreign professionals for a service that could, and should, be delivered domestically.