The Independent Power Producers’ Association, Nepal (IPPAN), has urged the Insurance Board to implement an earlier agreement with the Nepal Insurers’ Association to remove the minimum premium provision for hydropower project insurance.

On Tuesday, a delegation led by IPPAN President Ganesh Karki met with Insurance Board Chairman Sharad Ojha, requesting the implementation of the agreed shift toward a detariffed insurance structure—eliminating the mandatory minimum premium rates for hydropower insurance.

Karki highlighted several issues faced by hydropower developers, including the frequent lack of insurance coverage and last-minute bargaining during policy renewals. He emphasized that claim settlements often take six months to a year, causing significant delays in project recovery. Karki urged the Board to enforce provisions that would require insurers to compensate for such delays with interest. While slow claim settlements may not critically impact other sectors, he said, for hydropower developers—who rely on timely claims to rebuild infrastructure—a delayed payout can render their one-year license validity useless.

IPPAN further noted that much of the delay in claim settlements stems from insurance companies dispatching surveyors late, or assigning individuals unfamiliar with hydropower. These surveyors often take months to submit their reports, forcing project developers to wait years for compensation.

“The ‘Minimum Premium Directive 2078’ issued for non-life insurers increased premiums for hydropower insurance by up to 500%, which has left the sector in limbo,” said Karki. “The issue remains unresolved to this day.”

Former Insurance Board Chairman Suryaprasad Silwal had previously stated that if both the insurance company and the promoter agreed on an alternative arrangement, it would be accepted by the Board. Following this, IPPAN and the Nepal Insurers’ Association had, in Shrawan last year, jointly informed the Board of their consensus on moving toward a detariffed model. However, the Board has yet to initiate any formal process on the matter.

Despite some projects suffering damage from floods and landslides, IPPAN maintains that most hydropower projects are secure, and thus the sector should transition to a detariffed premium structure.

IPPAN Vice President Uttam Bhlon added that while Nepali reinsurance companies usually demand a fixed share in most insurance types, they often invoke the “right of refusal” when it comes to hydropower reinsurance. He called for the removal of this provision, arguing it creates an unfair burden on hydropower insurers.

Chairman Sharad Ojha acknowledged that the 250% to 500% premium hikes have indeed burdened hydropower developers. However, he also questioned why reinsurance companies have failed to show profits despite such high premiums, suggesting that a deeper analysis is needed before taking further steps. He pointed to the U.S. model, where detariffing benefited both promoters and insurers, and contrasted it with India’s experience—where detariffing failed, prompting a regulatory shift to fixed minimum rates and risk-based maximum premiums. Ojha said Nepal should carefully study which model best fits its context.

Responding to IPPAN’s call for a standalone insurance company dedicated solely to hydropower—citing a lack of interest from existing insurers—Insurance Board Executive Director Sushil Dev Subedi expressed skepticism about the viability of such a company. Instead, he proposed the formation of a “Hydro Insurance Pool” as a more effective solution. He added that this pool would also include mechanisms to prevent any single company from monopolizing business in a particular region or corridor.

Source: Kantipur