KATHMANDU: More than two-thirds of total investments of non-life insurance companies by the second quarter of the current fiscal year 2025/26 are concentrated in fixed deposit accounts of banks and financial institutions (BFIs).

According to data released by the Nepal Insurance Authority, the 14 non-life insurance companies in operation had total investments of Rs 64.28 billion as of mid-January. Of this, Rs 46.51 billion, or 72.35% of total investment, was parked in fixed deposits. This shows heavy reliance of non-life insurers on low-risk, fixed-income instruments.

Most of these deposits are concentrated in commercial banks, where non-life insurance companies have invested Rs 41.31 billion. They have also placed Rs 4.19 billion in development banks and Rs 1 billion in finance companies.

Insurers have also diversified smaller portions of their portfolio across other instruments. These investments include Rs 5.36 billion in shares of listed public companies, Rs 3.15 billion in preferred shares, bonds, debentures, and debt instruments issued by banks and financial institutions, and Rs 1.91 billion in bonds and debentures of listed public companies. They have also invested Rs 1.51 billion in the Citizens Investment Trust and mutual funds, Rs 2.74 billion in promoter shares, and smaller amounts in government securities and unlisted public companies.

Similarly, these companies have invested Rs 1.10 billion in sectors such as agriculture, cold storage, tourism, hydropower, solar and renewable energy projects, cable cars, roads, power transmission lines, education, and healthcare. An additional Rs 1.14 billion has been invested in other sectors.

However, heavy reliance on fixed deposits has affected the profitability of non-life insurance companies. With interest rates on fixed deposits at all-time low levels, their interest income has dropped significantly. Similarly, increased claim payouts, particularly for losses linked to property damage during the Gen Z protests, have also hit their profits. As a result, only one of the 14 non-life insurers reported a profit in the second quarter, while five companies posted losses and eight saw their profits decline.