The Insurance Board (IB) has
summoned board of directors of NB Insurance to seek clarification over the
latter´s failure to restore misappropriated sum of Rs 35.3 million in its
coffers. The decision to summon board members of the troubled non-life insurer
was taken as the three-month deadline extended to the company to recoup the
embezzled amount expired on Thursday.
"We called them to our office
to listen to their side of the story. We will decide on the future course of
action only after that," Binod Aryal, executive director of the Insurance
Board, told Republica. The insurance sector regulator, on October 2, had given
a period of three months to the company to return Rs 35.3 million that was
siphoned off to a fixed deposit account in World Merchant Banking and Finance
Company by violating investment norms set by the Insurance Board.
Based on the condition of
recouping the money, the regulator at that time had also lifted two-month ban
put on business activities of the company, which was found guilty of
misappropriating millions of rupees raised in the form of insurance premium
from the public.
The insurance company,
promoted by NB Group, had landed in trouble after it was found making a
controversial payment of Rs 59 million in the pretext of clearing house rent.
Since the payment was made without taking prior consent of the Insurance Board,
it directly violated the regulatory norm that bars insurers from making
expenses in excess of Rs 2 million without taking prior permission.
As investigation continued,
it was found that the payment was made by misappropriating cash lying in the
´earmarked fund´ -- which is made up of amount parked in reserve fund,
insurance fund, unexpired risk reserve and outstanding claim reserve. Although
insurance companies are barred from using any amount parked in this fund, NB
Insurance had managed to draw off over Rs 70 million from the reserve.
Of this amount, Rs 21.5
million, deposited at Nepal Housing and Merchant Finance, was later transferred
to various commercial banks, and Rs 15.3 million was parked at call and current
accounts of different finance companies. But a huge chunk of money - Rs 35.3
million - currently lies in World Merchant Banking and Finance Company, which
is in deep financial trouble.
So far, the finance company
has denied releasing the amount citing there is few months left for the
two-year fixed deposit to mature. But the Insurance Board is not interested in
listening to these excuses, as the company had flouted the law that bars
insurers from parking more than three percent of gross amount allocated for
investment purpose in one finance company Bikrant Pandey, acting CEO of NB
Insurance, said: "We would be able to fix everything in a few months time as
only the deposit at World Merchant is maturing in around three months."