A recent amendment to the Financial Services Act of Bhutan 2011 has already attracted interest from around seven individuals looking to establish insurance companies. However, before any new company can enter the market, the Royal Monetary Authority has suspended new licence applications for six months while it reviews the regulatory and licensing framework.
Earlier this month, Parliament amended the Financial Services Act of Bhutan 2011 by removing a provision that allowed insurance companies to offer either life insurance or general insurance. Once the amendment takes effect, insurers will be able to provide both services under one company.
The amendment has attracted interest from around seven individuals. However, the RMA has imposed a six-month moratorium on new licence applications.
The central bank says it has already assessed the feasibility of licensing new insurance companies. It says the recent amendment requires a review of the existing licensing framework before any new companies can be approved.
The RMA says the six-month review will help it assess regulatory and market conditions. It will then decide whether to lift, extend or modify the moratorium.
At present, there are only two insurance companies: Royal Insurance Corporation of Bhutan Limited (RICBL) and Bhutan Insurance Limited (BIL). However, only RICBL is licensed to provide both life and general insurance services.
Many people believe more insurance companies would increase competition, improve services and make insurance more affordable.
“I think we need two more companies. If we have more insurance companies, there will be more competition and better premiums. Especially when we take insurance, they only ask for a few documents, but when we have to make a claim, many documents are required, and it becomes very hassle,” said Nanda Lal Pradhan, a resident of Thimphu.
“I feel that if we have more insurance companies in the country, it would benefit us, especially taxi drivers. Right now, other car owners can opt for cheaper third-party insurance. But for taxi drivers, we need first-party motor insurance, and the first-time cost is quite high, around Nu 21,000 to 22,000. With more insurance companies, I think we would benefit,” said Tenzin, a taxi driver in Thimphu.
If the suspension is lifted, the RMA will introduce a revised licensing framework. It will then invite applications under the updated rules.
The central bank is also awaiting the Ministry of Finance’s formal resolution on the amended law.
Kinley Bidha
Edited by Sangay Chezom
