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By Sandeep Chaudhary

Insurance and Pension Services Deficit Remains High at USD −7.3M

Insurance and Pension Services Deficit Remains High at USD −7.3M

Nepal’s Balance of Payments (BoP) report for the first month of fiscal year 2025/26 shows that the insurance and pension services deficit remained elevated at USD −7.3 million, reflecting the country’s growing reliance on foreign insurance coverage and reinsurance payments abroad.

According to Nepal Rastra Bank (NRB), insurance-related payments to international companies continue to outpace the premium income received from foreign sources. Most of these outflows are tied to reinsurance contracts, life-insurance settlements, and foreign pension contributions made by Nepali workers abroad.

Experts note that this structural deficit is normal for a developing economy like Nepal, where large insurance and pension corporations are headquartered overseas. However, the widening gap underscores Nepal’s limited capacity to retain financial services income domestically. In particular, the lack of strong domestic reinsurance companies forces local insurers to send significant premiums abroad for risk coverage, draining foreign exchange reserves.

The figure also suggests that pension outflows related to foreign employment and multilateral staff benefits have increased, highlighting how Nepal’s integration into the global labor and service economy affects its financial flows.

Overall, despite strong remittance inflows and a current account surplus, the persistent deficit in insurance and pension services remains a vulnerability in Nepal’s external balance, pointing to the need for reforms in the insurance and retirement fund sector.

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