The recent “Gen Z” protests in Kathmandu have brought renewed attention to the exposure of Nepal’s insurance and reinsurance sectors to socio-political instability, according to insights from AM Best.
While the full financial impact remains unclear, early estimates indicate that insured losses could be substantial.
Initial reports from the hotel sector point to losses exceeding NPR 25 billion (US$177 million), with additional multi-billion rupee losses reported among retail chains and vehicle dealers. AM Best notes that the total volume of insured and economic claims is still uncertain, but the Nepal Insurance Authority has already recorded gross insured losses approaching the scale of those seen during the 2015 Nepal earthquake.
Many affected properties are believed to be uninsured, but policy extensions for RSMDST (riot, strike, malicious damage, sabotage, and terrorism) risks are available for additional premiums. Business interruption losses may also emerge, though these are typically covered only if policyholders have purchased separate consequential loss policies.
Strikes, riots, and civil commotion (SRCC) coverage has become a focus for the re/insurance industry globally, with experts noting that liability claims can arise not only from direct property damage but also from allegations of negligent security or police actions during unrest.
AM Best also highlights that even relatively modest claims can have a significant effect on Nepal’s non-life insurance market, which is valued at approximately NPR 45 billion. Social inflation, driven by increased political polarization and populism, is contributing to higher casualty insurance losses globally.
While some losses are ceded to a RSMDST pool, AM Best points out that higher-than-expected retention at the company level could threaten capital adequacy, especially for insurers with limited capital reserves. Domestic reinsurers are also expected to face capital pressure in the near term, according to AM Best.
Retrocession arrangements may help mitigate some of the financial strain, but elevated retention of RSMDST exposures could still erode capital buffers, reducing the ability of reinsurers to absorb future shocks.
S&P Global Ratings recently reported that reinsurance pricing peaked in early 2025 and is expected to moderate, with global reinsurers maintaining strong capitalization despite rising catastrophe losses.
This trend is relevant for Nepalese insurers and reinsurers as they navigate the aftermath of the protests, since the global reinsurance market’s stability and pricing environment may influence the availability and cost of risk transfer solutions for local companies.
Political uncertainty further complicates the situation for Nepalese insurers and reinsurers. AM Best observes that changes in government can slow regulatory approvals, including those needed for capital raising. Delays in securing capital and managing liquidity could intensify financial stress if claims are paid out faster than balance sheets can be restored.
What are your thoughts on this story? Please feel free to share your comments below.
