An internal team of the Finance Ministry has suggested limiting the tenure of chief executive officers of insurance companies to just two terms.

The team made the suggestion considering the fact that longer association of CEOs with some of the institutions resulted in poor corporate governance practices, according to ministry officials.

“The suggestion is also inspired by a provision in the bill on Bank and Financial Institution Act (Bafia), under which tenures of CEOs and chairmen of banks and financial institutions have been limited to two terms,” said Surya Prasad Acharya, joint secretary at the ministry.

The team was formed to make recommendations on the draft bill on Insurance Act, which the Insurance Board (IB) had forwarded to the ministry last year.

The team has also suggested maintaining the paid-up capital requirement for life insurance companies at Rs5 billion and that for non-life insurers at Rs4 billion. Currently, the requirements stand at Rs500 million Rs250 million, respectively.

Insurance companies have long been opposing the idea of increasing the paid-up capital requirements.

However, IB Chairman Fatta Bahadur KC said hiking the capital requirement was must given the rise in the volume of business and risks. “The April earthquake also showed the insurers must have the capacity to face risks of such bigger calamities,” said KC.

Only 3.53 percent of the private properties have been insured, as suggested by the claims against earthquake damage. Such a low coverage helped insurers absorb the shock of the earthquake. But the situation may not always remain the same, KC said.

According to the Post-Disaster Needs Assessment (PDNA) report, the quake caused damage worth Rs517billion, but the insurers say they received claims worth just Rs18.29 billion.

Meanwhile, the ministry’s team has suggested maintaining the paid-up capital requirement for reinsurance companies at Rs10 billion. The country currently has only one reinsurance companies that opened last year. It has a paid-up capital of Rs2 billion. The government plans to increase the capital base to Rs5 billion.