Insurance is a contract, represented by a policy, in which an individual or entity receives

financial protection or reimbursement against losses. It is a form of risk management primarily

used to hedge against the risk of a contingent or uncertain loss. An entity which provides
insurance is known as an insurer, insurance company, insurance carrier or underwriter and a
person or entity who buys insurance is known as an insured or as a policy holder. The insured
receives a contract, called insurance policy, in which insurer guarantee and compensate the
insured covered loss in form of financial payment.

History of Insurance

Initially, people sold goods in their own villages or gathering places with the passage of time,
they turned to nearby villages to sell. Two types of economies existed in human societies
natural or non monetary economies and monetary economics. Insurance in non-monetary
economies entails agreements of mutual aid. Insurance in non monetary economies entails
agreement of mutual aid and encourage mutual survival in adverse circumstances.

Babylonian, Chinese and Indian traders practiced methods of distributing risk in a monetary

economy in the 2nd  and 3rd  millennia BC, The Babylonians developed a system recorded in the
famous Code of Hammurabi, c. 1750 BC, and practiced by early Mediterranean
sailing merchants. Later Greek and Roman in  600 BC set up guilds called "benevolent
societies", which cared for the families of deceased members, as well as paying funeral expenses
of members. Before modern-style insurance became established in the late 17th century, friendly
society existed in England, in which people donated amounts of money to a general sum that
could be used for emergencies. In 1293, D Dinis King of Portugal advanced the interests of the
Portuguese merchants, and set up by mutual agreement a fund called the Bolsa de Commercia,
the first documented form of marine insurance in Europe, approved on 10 May 1293. The traders
sent (export) their goods to the agents who on the behalf of traders sold them. Sending goods to
the agents by road or sea involves different risks ie. sea storms, pirate attack; goods may be
damaged due to poor handling while loading and unloading, etc. Traders exploited different
measures to hedge the risk involved in the exporting. Instead of sending all the goods on one
ship/truck, they used to send their goods over number of vessels to avoid the total loss of
shipment if the vessel was caught in a sea storm, fire, pirate, or came under enemy attacks but
this was not good practice due to prolonged time and efforts involved. Insurance is the oldest
method of transferring risk, which was developed to mitigate trade/business risk. Marine
insurance is very important for international trade and makes large commercial trade possible.

Insurance became more sophisticated in enlightment era of Europe, and specialized varieties
developed. Some forms of insurance developed in London in the early decades of the 17th
century. Types of insurance : Property insurance, business insurance, life insurance, accidental
insurance, national insurance etc.

Insurance history in Nepal

It is obvious that the world is surrounded by risks and uncertainties in the 21st century of
modernization and globalization. Especially, in developing country like Nepal, safety and
security are one of the key issues. It gives author an immense pleasure to research insurance
market in Nepal. The insurance in Nepal doesn’t have a long history. The first home grown
general insurance company was named as Nepal Malchalani Tatha Beema Company
(currently known as Nepal Insurance Company Limited) which was jointly established under
Nepalese Companies Act with full ownership Nepal Bank Limited which works as non-life
insurance business under Insurance Act 2049. In Poush 1, 2024 BS, the Government of Nepal
established “Rastriya Beema Sansthan” under company act with capital of Rs 1 Crore. At first, it
was operated as non-life insurance , but from Falgun 7, 2029BS it also started life insurance and
now transformed into an institution under “Rastriya Beema Sansthan Act 2025”. Financial
liberalization policy allowed private sector (both domestic and foreigner) to establish
insurance companies in Nepal. Currently, 40 insurers (20 nonlife, 19 life and a reinsurer) are in
operation. Beside the commercial insurance, social insurance services and insurance for deposits
and loan, community based health insurance and insurance likely social protection activities
are also available in Nepal

Life is uncertain. A man may die relatively young, leaving his dependent without adequate
financial supports. So, life insurance plays a major role to overcome this deficiency. It is an
insurance that is done to safeguard the future of insurer’s family by giving strength to pursue
their prosperous future. It is not only in the case of death of insurer but also in times of his/her
serious illness or incapable of continuing work. Life insurance provides a support to rebuild the
confidence in future

Life insurance is a contract providing for payment of a sum of money to the person assured or to
his nominee, on the happening of certain events”

Nepal Insurance Act 1992(section 2-1) has defined life insurance as “the contract of insurance,
affected on human life on the basis of age to pay a fixed sum to the assured or his nominee, on
the death or on the happening of any contingency, dependent on human life in consideration of
payment of a fixed installment premium by the insured person”.

It is a contract between insured and insurer, insured pays premium in regular basis
for certain period and insurer provides benefits to insured as per the terms and conditions. There
are different types life plan. They are:
a) Term Insurance Plan: Term plan covers the risk but it has no saving/investment components
so the premium is lower as compared to endowment and whole life. This plan is more popular in
corporate sector (for employees), financial institution (for borrowers), and manpower companies
(for foreign migrant workers) and less demanded among the individual, traders and
professionals.
b) Endowment Plan: Under the endowment plan, policyholder either gets death benefit or
maturity benefit which occurs earlier so the premium is higher than term and whole life plan.
Various endowment plans are available in the market viz. general endowment, limited payment,
single payment, money back, child endowment, joint endowment, pension plan etc. Nowadays,
critical illness benefits is also inbuilt to attract the customers. Riders are common in endowment
plan.
c) Whole Life Plan: The plan covers the risk for entire life of the policyholder and
provides
death benefits to beneficiaries. Some companies provide the benefits after certain age before the
death of the policyholders. Whole life plan is suitable to those who has not sufficient money for
saving but need financial support at elder age and after death. Almost all life insurers have such
type of product.
There are several life insurances in Nepal.

1 Rastriya Beema Sansthan 1968 Govt. Owned

2 National Life Insurance Company Limited 1988 7Joint Venture&

3 Nepal Life Insurance Company Limited 2001 Domestic

4 Life Insurance Corporation (Nepal) Limited 2001 Joint Venture*

5 American Life Insurance Company 2001 Foreign branch**

6 Asian Life Insurance Company Limited 2008 Domestic

7 Gurans Life Insurance Company Limited 2008 Domestic

8 Surya Life Insurance Company Limited 2008 Domestic

9 Prime Life Insurance Company Limited 2008 Domestic

10 I.M.E. Life Insurance Company 2017 Domestic

11 Jyoti Life Insurance Company 2017 Domestic

12 Union Life Insurance Company 2017 Domestic

13 Sun Nepal Life Insurance Company 2017 Domestic

14 Reliance Life Insurance Company 2017 Domestic

15 Reliable Nepal Life Insurance Company 2017 Domestic

16 Citizen Life Insurance Company 2017 Domestic

17 Sanima Life Insurance Company 2017 Domestic

18 Prabhu Life Insurance Company 2017 Domestic

19 Mahalaxmi Life Insurance Company