Credit rating agency AM Best has warned that Nepal’s non-life insurance market could face serious financial stress following recent riots in Kathmandu.
The protests, widely labeled the “Gen Z” movement, highlighted how exposed insurers and reinsurers in Nepal are to political and social unrest.
In a special report titled “Riots Impose Financial Strain on Nepal’s Insurers and Reinsurers,” AM Best observed that although many damaged properties were not insured, policy extensions in Nepal typically provide coverage for riots, strikes, malicious damage, sabotage, and terrorism (RSMDST).
According to AM Best, insured losses reported so far by the Nepal Insurance Authority have already reached a scale similar to that of the 2015 earthquake.
The agency cites preliminary estimates from industry sources indicating that hotel operators alone have suffered losses exceeding NPR 25 billion (USD 177 million), with retail chains and auto dealers also reporting substantial damage.
AM Best emphasised that Nepal’s non-life sector, worth around NPR 45 billion, is especially vulnerable due to its modest size. While a pool has been established to share RSMDST risks, insurers are still expected to retain more exposure than anticipated. For companies with thin capital buffers, the rating agency warned this could erode solvency levels and weaken their ability to withstand further shocks.
In its report, AM Best also flagged concerns for Nepal’s reinsurers. Although retrocession arrangements—passing risks on to other reinsurers—may provide some relief, the agency said high levels of retained exposure are likely to place domestic reinsurers under significant strain. This could reduce their ability to support the wider market in the near term.
AM Best further cautioned that political uncertainty adds another layer of difficulty. Changes in government can delay regulatory approvals and hinder insurers’ efforts to raise capital or secure liquidity.
According to the agency, such delays risk amplifying financial stress if claims escalate faster than insurers and reinsurers can rebuild their balance sheets.
AM Best’s analysis underscores how a single episode of civil unrest can have an outsized effect on Nepal’s insurance sector. With insured losses already nearing levels last seen during one of the country’s worst natural disasters, the agency says insurers and reinsurers now face not only financial strain but also the risks posed by a fragile political environment.
“The outsized proportion of losses arising from widespread riots highlights the likelihood of earnings and capital impacts on the market, especially if claims continue to escalate,” added Susan Tan, Senior Financial Analyst, AM Best.
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