Tribhuvan University
Institute of Science and Technology
School of Mathematical Sciences
RISK AND ACTUARIAL DEPARTMENTAL PRACTICES AT
SHIKHAR INSURANCE COMPANY LIMITED
An Internship Report
Submitted to the
School of Mathematical Sciences
Institute of Science and Technology, Tribhuvan University
in
Partial Fulfillment of the Requirements
for the Bachelor’s Degree in Mathematical Sciences
Submitted by:
Prakriti Baral
School of Mathematical Sciences
Roll No.: BMS 220/077
T.U. Reg. No.: 5-2-28-21-2020
January 2024
DECLARATION
Tribhuvan University
Institute of Science and Technology
School of Mathematical Sciences
I hereby declare that the report entitled “RISK AND ACTUARIAL DEPARTMENTAL
PRACTICES AT SHIKHAR INSURANCE COMPANY LIMITED” is my work toward the award
of the B.Math.Sc. degree and it contains no materials previously published by another person. This
report has not been submitted to any other university or institution for the award of any degree.
…………………
Prakriti Baral
January 2024
ii
PLAGIARISM CERTIFICATE
iii
LETTER FROM THE ORGANISATION
iv
LETTER OF RECOMMENDATION
The internship report entitled “RISK AND ACTUARIAL DEPARTMENTAL PRACTICES AT
SHIKHAR INSURANCE COMPANY LIMITED” submitted by Ms. Prakriti Baral of the School
of Mathematical Sciences, Balkhu, Kathmandu, is prepared under my supervision as per the
procedure and format requirements laid by the Institute of Science and Technology, Tribhuvan
University, as partial fulfillment of the requirement for the degree of Bachelor of Mathematical
Science (B.Math.Sc.). I, therefore, recommend the internship report for evaluation.
…………………………….
Mr. Ammar Bahadur Karki
Supervisor
January 2024
v
LETTER OF APPROVAL
This is to certify that the intern report entitled “RISK AND ACTUARIAL DEPARTMENTAL
PRACTICES AT SHIKHAR INSURANCE COMPANY LIMITED” done by Ms. Prakriti Baral
is satisfactory in the scope and generality as an intern report in the partial fulfillment of the
requirement for B. Math. Sc. in Actuarial Science.
Evaluation Committee:
…………………………….
Mr. Ammar Bahadur Karki
Supervisor
……………………………….
External Examiner
…………………………………
Assoc. Prof. Nawaraj Paudel
Director
vi
ACKNOWLEDGEMENT
I would like to express my heartfelt gratitude to Shikhar Insurance Company Limited for
granting me the opportunity to intern with their esteemed organization. My sincere thanks go to
the CEO, Mr. Dip Prakash Panday, and CFO, Mr. Suraj Rajbahak, for their leadership and for
fostering a welcoming and supportive environment that enriched my learning experience.
I am especially thankful to my supervisor, Mrs. Smriti Ghimire, the Head of the Risk and
Actuarial Department, for her continuous guidance, invaluable advice, and unwavering support
during my internship. Her mentorship has been instrumental in my professional development, and
the skills I gained would not have been possible without her.
I am deeply grateful to Mr. Ganga Prasad Regmi, Deputy Manager of the Finance Team, for his
valuable insights and support throughout my internship, which helped me gain a better
understanding of the financial aspects of the organization. I would also like to thank Mrs. Shikha
Mainali, the HR Head, for creating a welcoming and friendly environment that made my
internship experience enjoyable and productive. Her encouragement and support were
instrumental in making my time at Shikhar Insurance both rewarding and educational.
I would also like to extend my special thanks to Ms. Upama Chaulagain and Mr. Pritesh
Acharya for their kind guidance and cooperation during my time at the organization. Their
assistance and mentorship made a significant impact on my learning and personal growth.
Additionally, I would like to express my gratitude to Mr. Keshab Raj Phulara for his constant
support and guidance during the preparation of my internship report. His valuable feedback and
assistance were critical in shaping the report and enhancing my learning experience.
I would also like to thank Assoc. Prof. Nawaraj Paudel, Prof. Dr. Prakash Muni Bajracharya,
Dr. Chakra Bahadur Khadka, Mr. Amar Bahadur Karki, Mr. Sudeep Sigdel, Mr. Madhab
Prasad Bhatta, Mr. Om Prakash Bhatta, and Mr. Samundra Gautam for their valuable
assistance, thoughtful advice, and guidance in completing this report.
Finally, I express my profound gratitude to my parents, my sister Pratiksha Baral, and my friends
for their continuous encouragement and unwavering support throughout this journey.
Prakriti Baral
January 2024
vii
ABSTRACT
This internship report encapsulates the practical experiences and learnings acquired during a
three-month internship at Shikhar Insurance Company Limited. The internship primarily focused
on the Risk and Actuarial Department, exposing the intern to critical functions such as solvency
valuation, product development, and regulatory compliance. The intern contributed to the
development of investment PV Calculator, assisted in the analysis and validation of Quantitative
Risk Reporting Templates (QRRT), and engaged in reporting to the senior management team about
the analyses done.
These activities provided hands-on exposure to applying actuarial principles to real-world
scenarios, while enhancing technical competencies in data analysis, financial modeling, and
regulatory reporting. Collaborative tasks, including liaising with different departments, improved
the intern’s communication and teamwork skills, enabling a holistic understanding of operational
dynamics within an insurance organization.
The internship also presented challenges, such as adapting academic concepts to industry
applications and managing concurrent projects under strict deadlines. Overcoming these
obstacles improved the intern’s problem-solving and time-management abilities. This experience
served as a pivotal step in professional development, equipping the intern with the skills and
confidence needed for a career in actuarial science and the insurance industry
viii
TABLE OF CONTENTS
Contents
Page No.
DECLARATION
ii
PLAGIARISM CERTIFICATE
iii
LETTER FROM ORGANIZATION
iv
LETTER OF RECOMMENDATION
v
LETTER OF APPROVAL
vi
ACKNOWLEDGEMENT
vii
ABSTRACT
viii
TABLE OF CONTENTS
ix-x
LIST OF ACRONYMS/ABBREVIATIONS
xi
LIST OF FIGURES
xii
CHAPTER I - INTRODUCTION
1-6
1.1 Background of the Study
1-3
1.2 Objective of the Study
3
1.3 Methodology
3-5
1.4 Limitations of the Study
5-6
CHAPTER II – INTRODUCTION OF THE ORGANIZATION
7-19
2.1 Introduction of Shikhar Insurance Company Limited
7
2.2 Vision, Mission and Goals
7
2.3 Products Offered
8-13
2.3 Departments of the Company
13-16
2.5 Present Situation
17-18
2.6 Challenges and Opportunities
18-19
CHAPTER III – ANALYSIS OF ACTIVITIES DONE AND PROBLEM SOLVED 20-28
3.1 Activities Performed
20-27
3.2 Skills Learnt
27
3.3 Challenges Faced and Solved
27
3.4 How Could More Experience Be Gained?
27
3.5 How Could Have the Intern Done the Work Better?
27
3.6 How Will This Experience Help the Intern in Future?
28
ix
CHAPTER IV - CONCLUSION, AND SUGGESTIONS
30-31
5.1 Conclusion
30
5.2 Fulfillment of Objectives
30
5.3 Suggestions to the Organization
30-31
5.4 Suggestions to the College
31
REFERENCES
32
x
LIST OF ACRONYMS/ABBREVIATIONS
B.Math.Sc
Bachelors in Mathematical Sciences
B.S
Bikram Sambat
CEO
Chief Executive Officer
DCEO
Deputy Chief Executive Officer
IT
Information Technology
M.S Excel
Microsoft Excel
NIA
Nepal Insurance Authority
ORSA
Own Risk Solvency Assessment
QRRT
Quantitative Risk Reporting Template
RBC
Risk Based Capital
SMSTU
School of Mathematical Sciences, Tribhuvan University
xi
LIST OF FIGURES
Fig 3.1: Template of the calculator
21
Fig 3.2: Premium Growth of Non Life Insurance
25
Fig 3.3: Porfolio wise Premium Share in 80/81
26
Fig.3.4: Combined Ratio Comparison
27
xii
CHAPTER I
INTRODUCTION
1.1 Background of the Study
Internships have become integral to higher education systems worldwide, valued for their potential
to enhance students' employability and bridge the gap between academic learning and real-world
professional skills. These co-curricular experiences allow students to gain practical exposure while
meeting employer needs for skilled talent. This dual benefit has led to the rise of what is often
referred to as "the era of the internship" in global education (McHugh, 2017; Zehr & Korte, 2020).
Internships play a crucial role in shaping students' transition from academia to the professional
world. They not only provide practical exposure but also help build confidence in career readiness.
Research has shown that internships can significantly enhance employability perceptions by
addressing concerns about entering the job market. The high-quality internships alleviate careerentry worries—such as uncertainty about finding suitable employment or achieving a fulfilling
career—leading to increased self-assurance among students as they prepare to join the workforce.
This underscores the importance of internships as a bridge between education and employment,
offering both practical skills and psychological readiness for the challenges ahead (Ebner et al.,
2021).The success of these internships, however, often depends on the quality of mentorship
students receive. Effective mentorship not only shapes the learning experience but also bridges the
gap between academic expectations and workplace realities. Understanding the challenges faced
by mentors is crucial for designing internships that are beneficial for both students and
organizations. By addressing these challenges, institutions and employers can create a more
supportive environment that enhances learning outcomes and prepares students for their future
careers (Schneider et al., 2024).
A growing body of recent research underscores the positive impact of internships on career
readiness and employability. High-quality internships offer opportunities for students to develop
vital soft skills, such as teamwork, leadership, and self-management, while also cultivating
domain-specific knowledge. Jackson (2013) study have shown that students who complete
internships report greater self-confidence and improved problem-solving abilities, which are
essential for thriving in competitive job markets. The experiential learning gained through
internships also facilitates a smoother transition from academic to professional environments,
reducing anxieties associated with career entry (Inceoglu et al., 2019).
1
However, the quality of internships is critical to their effectiveness. Research highlights that not
all internships equally prepare students for the workforce. Attributes such as organizational culture,
mentorship quality, and alignment with career goals significantly influence students’ perceptions
of their preparedness (Zehr & Korte, 2020). Well-designed internships that incorporate feedback
mechanisms and clearly defined roles are more likely to yield positive outcomes, enhancing
students' employability and reducing career-related uncertainties.
As the emphasis on internships grows, they are increasingly recognized as a strategic tool not only
for skill development but also for fostering inclusivity and equity in employment. Programs that
prioritize accessibility can bridge gaps for underrepresented groups, ensuring broader participation
in the workforce. Furthermore, the rise of remote internships and digital platforms during the
COVID-19 pandemic has expanded access and flexibility, allowing students from geographically
remote or economically disadvantaged areas to participate in professional experiences that were
previously inaccessible. This marks a significant evolution in internship practices globally
(Galbraith & Mondal, 2020).
Globally, internship practices vary significantly. In some regions, structured internships are
mandatory as part of academic programs, while in others, they remain voluntary but highly
encouraged. The global shift toward student-centered education has further emphasized the need
to involve students in designing these experiences. Collaborative efforts between educational
institutions and industry stakeholders ensure that internships are tailored to meet both learning
objectives and labor market demands
In summary, internships serve as a transformative educational practice, equipping students with
the skills, confidence, and networks required for career success. By continually refining these
programs based on empirical research and industry feedback, educators and employers can
maximize their impact on student outcomes and workforce readiness.
Internships are also a crucial component of the Bachelor’s in Mathematical Sciences (B.Math.Sc)
program at the School of Mathematical Sciences, Tribhuvan University (SMSTU),for students
specializing in actuarial science. As part of their course requirements, students must complete an
eight-week internship, ideally in settings where they can apply actuarial concepts. These
placements may include life insurance companies, general insurance firms, reinsurance companies,
pension funds, or actuarial consulting agencies. Gaining practical experience in these areas helps
students enhance their mathematical and analytical abilities while deepening their understanding
2
of risk management, insurance principles, and actuarial practices, all of which are essential for
succeeding in the profession.
Incorporating internships into the B.Math.Sc curriculum is part of a larger shift in education,
emphasizing the development of skills beyond theoretical knowledge. These include critical
thinking, problem-solving, and teamwork, which are highly valued by employers in today’s
competitive job market. Employers increasingly look for candidates who bring practical
experience and adaptability to the table.
In summary, internships are vital for students to acquire hands-on skills, build self-assurance, and
prepare for their careers. They serve as a bridge between academic learning and real-world
application, enhancing the quality of students' education and offering valuable contributions to the
organizations they work with.
1.2 Objective of the Study
The objective of the study is:
i) To assess the risk and actuarial departmental practices at Shikhar Insurance Company Ltd.
1.3 Methodology
This study relies on both primary and secondary data sources. The primary data comprises insights
gained through firsthand experience during the internship at the company. Additionally, secondary
data is sourced from the company’s website and printed materials, including actuarial valuation
reports, valuation notes, annual reports, and other relevant documents.
1.3.1 Organization Selection
Shikhar Insurance Company Limited presented an excellent opportunity to gain practical actuarial
experience, as the company was actively seeking an intern for its actuarial department. After
submitting my application, I successfully completed two rounds of formal interviews with key
executives, including the CEO, CFO, HR Head, and department representatives. The process was
both thorough and engaging, allowing me to demonstrate my skills and enthusiasm for the role.
Following these interviews, I was thrilled to receive the internship offer and officially joined
Shikhar Insurance on August 18, 2024. I began my work role in contributing to the team and further
developing my actuarial expertise in a dynamic and supportive environment
1.3.2 Placement
The internship offered the intern with a valuable opportunity to work in the Risk and Actuarial
Department of Shikhar Insurance Company Limited. It is located at the company’s head office in
3
Shikhar Biz Center, Thapathali, Kathmandu. The department plays a critical role in risk
management and actuarial analysis. The work was carried out under the supervision of Mrs. Smriti
Ghimire, the Head of Risk and Actuarial, ensuring a structured and professional learning
environment.
1.3.3 Duration
The duration of the internship was 66 working days between 18 August 2024 to 14 November
2024.
1.3.4 Activities Performed
Throughout the internship, the intern actively participated in a range of tasks within the
Reinsurance Department. This experience provided valuable practical exposure and enhanced the
intern's understanding of the department's functions and processes. Under the close supervision of
the department head, the intern contributed to several critical activities, effectively translating
theoretical concepts into practical applications. Key responsibilities undertaken by the intern
included the following:
1. Developed RBC Implementation Timeline
The intern created a comprehensive timeline for RBC implementation as per the directives of the
Nepal Insurance Authority (NIA), ensuring alignment with regulatory requirements and company
goals.
2. Cleaned and Analyzed Premium, Claims, and Reinsurance Data
Data cleaning and analysis were conducted for regulatory reporting and reserve estimations.
Ensuring data accuracy, the intern supported the appointed actuary by preparing data inputs for
calculations like IBNR and IBNER reserves.
3. Prepared Risk Register and Risk Matrix
The intern developed a risk register and risk matrix to document existing and potential risks across
the company. These documents were aligned with the RBC framework and ORSA policy,
providing a comprehensive risk management structure.
4. Designed Investment PV and Duration Calculator for QRRT Reporting
The intern developed investment PV and Duration Calculator to calculate Present Value (PV)
under non-stressed, up-stressed, and down-stressed scenarios. These models facilitated compliance
with QRRT requirements.
4
5. Conducted Reserve Estimations
Applying methodologies like the Chain Ladder, Bornhuetter-Ferguson, and Average Cost Per
Claim, the intern estimated reserves for outstanding claims, IBNR, and IBNER, ensuring reserve
adequacy through liability adequacy test.
6. Enhanced Reinsurance Optimization Strategies
The intern analyzed reinsurance treaties and conducted simulations for cost-effective optimization
strategies, improving the company’s risk-sharing mechanisms.
7. Created Power BI Dashboards
To visualize reinsurance and claims data, the intern developed Power BI dashboards, making it
easier to track performance trends and identify areas for improvement.
8 Automated QRRT Reporting Processes
Collaborating with the IT team, the intern introduced workflows to automate portions of QRRT
reporting, improving accuracy and efficiency in data submissions.
1.4 Limitations of the Study
The report is based on the intern's limited exposure and experience during the internship at Shikhar
Insurance Company Limited. The key limitations of the study are as follows:
i.
The intern's experience was confined to the Risk and Actuarial department, which
limited the scope of learning. A broader understanding of the insurance industry could
have been achieved by gaining exposure to other departments within the company.
ii.
The study primarily reflects the practices, systems, and processes at Shikhar Insurance
Company Limited, which may not be applicable to other insurance firms or
organizations, limiting the generalizability of the findings.
iii.
The study is based on a three-month internship period (from August 18 to November
22, 2024), meaning that the observations and results may not be representative of
different timeframes, market conditions, or regulatory changes.
iv.
Due to the short duration of the internship, certain aspects of actuarial work and
insurance operations, such as long-term planning or the development of complex
products, were not thoroughly examined.
v.
The internship was shaped by the tasks and projects assigned by the department, which
may not have provided a comprehensive overview of all facets of actuarial work.
5
vi.
The intern's learning and exposure were influenced by the specific nature of the tasks
and the team dynamics at Shikhar Insurance Company Limited. These factors may not
fully represent the wide range of responsibilities and challenges faced by actuarial
professionals in other contexts or organizations. Additionally, the study did not
encompass all actuarial methodologies or technologies that may be used in the industry,
limiting the breadth of knowledge gained.
6
CHAPTER II
INTRODUCTION OF THE ORGANIZATION
2.1 Introduction of Shikhar Insurance Company Limited
Shikhar Insurance Company Limited (SICL), a non-life insurance provider in Nepal, was
established on Mangsir 2, 2061 (Nepali calendar) and incorporated as a Public Limited Company
on Jestha 25, 2061. The company operates with 113 branches across Nepal and a workforce of
over 650 employees. As of the fiscal year 2023/24, Shikhar Insurance holds a leading market share
of 13.29%, positioning itself as the foremost general insurance company in Nepal.
Shikhar Insurance Company Limited (SICL) has a paid-up capital of NPR 2,654,947,300. The
ownership structure includes 51% held by promoters, amounting to 13,540,231.23 shares, and 49%
held by the public, representing 13,009,241.77 tradable shares. Moreover, Shikhar Insurance
Company Limited (SICL) is a leading insurance provider in Nepal, reaffirmed with an issuer rating
of [ICRANP-IR] A+ by ICRA Nepal.
The company is led by Mr. Dip Prakash Panday as the Chief Executive Officer (CEO), Mr.
Bimal Raj Nepal and Mrs. Sabita Maskay as Deputy Chief Executive Officer (DCEO).
2.2 Vision, Mission, and Goals
A vision statement describes what a company desires to achieve in the long-run, generally in a
time frame of five to ten years. Mission Statement is an action-based statement that declares the
purpose of our organization and how we serve our customers. Likewise, a goal is an endpoint,
accomplishment or target a company wants to achieve in the short term.
2.2.1 Vision
The vision of the company is to face every challenge that persists in the insurance industry.
2.2.2 Mission
The mission of the company is to provide its policy holders the best available insurance protection
and prompt settlement of claims when needed.
2.2.3 Goals
The goal of the company is to set the standard for the insurance industry by providing quality
service that meets customers’ expectations.
7
2.3 Products Offered
1. Health Insurance
The health insurance plan of Shikhar Insurance offers comprehensive medical coverage
with cashless treatment at 28 hospitals in Nepal and over 5,800 hospitals in India. It
covers in-patient hospitalization expenses, 150 daycare treatments (e.g., cataract surgery,
dialysis, oral chemotherapy), and pre- and post-hospitalization medical costs for 30 and
60 days, respectively. Suitable for individuals, families, and corporate employees, the
plan ensures financial protection for various medical needs. Exclusions include waiting
periods for pre-existing conditions, specific treatments, and non-medical expenses. For
non-network hospitals, reimbursement options are available.
2. Vehicle Insurance
Motor Vehicle Insurance provides comprehensive protection for vehicle owners,
covering damages to the insured vehicle and liabilities arising from harm caused to third
parties. It offers two types of coverage: Comprehensive Insurance, which protects
against accidental damage, theft, natural disasters, and optional risks like terrorism, while
also covering third-party compensation for injury, death, or property damage; and ThirdParty Liability Insurance, mandatory in Nepal, which solely covers third-party losses.
The policy is valid across Nepal, India, Bangladesh, Bhutan, and Tibet, offering wide
geographical coverage. Key exclusions include wear and tear, mechanical failures,
unauthorized driving, and damages resulting from war or other excluded circumstances.
3. Auto Plus Insurance
Motor Vehicle Additional Benefit Insurance by Shikhar Insurance Company Ltd.
enhances the standard Motor Vehicle Insurance by offering three key additional benefits
to ensure better financial protection for vehicle owners.
i.
Depreciation Waiver: Covers the depreciation cost of replaced parts under
comprehensive insurance, based on the surveyor's loss assessment report.
ii.
New Vehicle Replacement: Pays the difference between the sum insured and the
current showroom price of a similar new vehicle in case of a total loss.
iii.
Daily Rental/Transportation Cost: Reimburses daily transportation costs for up
to 30 days in case of total loss and up to 14 days for partial loss, with amounts
varying based on the type and value of the vehicle.
8
Available for private 4-wheelers and 2-wheelers up to 10 years old, this policy
supplements comprehensive insurance with targeted benefits for enhanced
indemnity. Additional premiums apply for each benefit, with charges for stamp
duty and VAT as required.
4. Travel Medical Insurance
Travel Insurance provides comprehensive coverage for Nepalese citizens traveling
abroad for business or leisure, as well as foreign residents in Nepal whose travel
originates and concludes in Nepal. The policy offers two plans: Plan A (Medical
Expenses + Personal Accident Cover) and Plan B (Comprehensive Package Cover).
Benefits include personal accident, medical and emergency expenses, loss or delay of
checked baggage, passport loss, personal liability, travel delays, hijack, trip
cancellations, legal expenses, and repatriation of family members. Coverage varies by
geographical region: worldwide (including or excluding the USA and Canada) covers all
benefits under Plan B, Asian countries provide benefits A-I, and SAARC countries offer
limited coverage under Plan A. This insurance ensures peace of mind for travelers with
tailored protection based on their destination.
5. Agriculture Insurance
Agriculture Insurance serves as a vital risk management tool, offering farmers financial
protection against production losses caused by natural perils such as drought, excessive
moisture, hail, frost, wind, and wildlife. It provides comprehensive coverage for a range
of agricultural activities, including livestock, poultry, fish, paddy, vegetables, fruits, and
farming, safeguarding against risks like fire, natural disasters (earthquake, flood,
landslide, storm), diseases, and insect infestations. This insurance ensures stability and
resilience for farmers by mitigating the financial impact of unforeseen events.
6. Home Insurance
Home Insurance provides reliable protection for your home and its assets, covering
damages and losses up to a sum insured of 2 crores. It safeguards against various risks,
including fire, water, air, and land hazards, lightning, explosions, self-ignition, impactbased damages, and RSMDST risks. Additional benefits include coverage for architect,
engineer, or surveyor fees, debris displacement, accidents, theft, burglary, and robbery.
However, exclusions apply for consequential losses, equipment breakage, damage to
9
electrical devices or stored information, war-related damages, radiation, and theft or
accidents under specific conditions. This policy ensures financial security and peace of
mind by mitigating the impact of unexpected events on your home.
7. Personal Accident Insurance
Personal Accident Insurance provides financial protection against accidental injury or
death, offering coverage for individuals and groups (Group Personal Accident
Insurance). The policy covers bodily injuries, including death, resulting directly from
external, violent, and visible accidents. Additional coverage for terrorism-related risks
(riot, strike, sabotage, etc.) is available with an extra premium.
Key benefits include coverage for death (100% of the sum insured), permanent total
disablement (100%), permanent partial disablement (varied percentages based on
severity), temporary total disablement (up to 1% of the sum insured per week or actual
income loss), and medical expenses (up to 10% of the sum insured, capped at Rs.
100,000). Additional allowances include cremation (Rs. 10,000) and funeral expenses
(up to Rs. 50,000).
Exclusions apply for injuries or deaths caused by intentional self-harm, intoxication,
specific risky activities (racing, mountaineering, scuba diving, etc.), war, radiation
exposure, or illegal acts. Introduced by Shikhar Insurance on November 17, 2004, this
policy offers comprehensive support to individuals and families facing unexpected
accidents.
8. Marine Transit Insurance
Marine Transit Insurance provides coverage for goods in transit, whether by sea, air, rail,
or road, from the point of dispatch to the final destination. This insurance protects the
cargo against various risks and perils during transit, covering both imports and exports.
It ensures that goods are safeguarded from the time they leave the supplier’s warehouse
until they arrive at the consignee’s warehouse. However, there are certain exclusions
under this policy, such as damage caused by willful misconduct, ordinary leakage, loss
in weight or volume, or insufficiency in packing. It also excludes losses due to the
inherent nature of the subject matter, delays (even if caused by an insured peril),
insolvency, misuse or loss of carrier's receipt, and war-related risks. Additionally, the
10
policy does not cover nuclear risks, strikes, riots, terrorism (unless additional cover is
included), capture by legal authority, and the unseaworthiness of vessels.
9. Trekker’s Assistant Insurance
Trekker’s Assistant insurance is a specialized form of personal accident insurance for
trekking activities. It provides 24-hour coverage during the trekking period, including
protection against death or permanent total/partial disablement caused by high altitude
sickness, snow blindness, frostbite, and death or injury due to a blizzard, all of which are
considered accidents under this policy. The coverage can be extended to include medical
expenses and search and rescue operations. However, there are certain exclusions,
including self-inflicted injuries or illnesses, medical expenses incurred beyond 12
months, war and civil war, government acts, and flying as a pilot or crew member. The
policy also excludes injuries or illnesses caused by alcohol or drugs, venereal diseases
such as AIDS or AIDS-related complex, and injuries sustained while racing, playing
polo, hunting, or engaging in big game shooting. Additionally, it does not cover any
injury or illness related to pregnancy, consequential loss, or individuals below 16 years
or above 60 years of age. Breach of law with criminal intent is also excluded.
10. Aviation Insurance
Shikhar Insurance Co. Ltd. offers Aviation Insurance that provides comprehensive
protection for aircraft against unexpected damages. The coverage includes accidental
damage, war and allied risks, as well as third-party liability, which extends to passengers
and cargo. Additionally, the policy encompasses aircrew personal accident coverage, loss
of license for pilots, aero-engine breakdowns, and airport operator liability insurance.
This portfolio is designed to address the unique risks associated with aviation and ensure
the safety and security of aircraft operations.
11. Property Insurance
Property Insurance provided by Shikhar Insurance Co. Ltd. covers loss or damage to
buildings, offices, and other properties caused by accidental events such as fire, lightning,
earthquake, explosion, storms, floods, and landslides. This policy can be extended to
include coverage for losses due to riots, strikes, malicious damage, and terrorism for an
additional premium. Premium determination is based on factors such as occupancy,
insured items, and risk, with specific deductible excess amounts for different types of
11
claims. The policy includes coverage for a wide range of scenarios, including fire, airbased losses, water-based losses, land-based losses, and other risks like explosion,
lighting, and impact from external objects. Additional benefits include coverage for
architect, engineer, and surveyor's fees, removal of debris, and personal accident
coverage for up to five persons in residential buildings. However, exclusions include
consequential losses, machinery breakdowns, damage to electrical appliances caused by
high voltage, losses from temperature fluctuations in cold storage, explosion of boilers,
loss of data in computers, and losses caused by public authorities, radioactive materials,
nuclear or chemical weapons, and war-related situations.
12. Banker’s Indemnity Insurance
Banker's Indemnity insurance, provided by Shikhar Insurance Company Ltd., offers
comprehensive coverage to institutions with significant financial transactions, such as
banks. This policy covers cash on premises, cash in transit, forgery or alteration,
dishonesty (fidelity guarantee), and hypothecated goods. The sum insured remains fixed
during the policy period, but branches, ATMs, and mobile banking can be added at the
inception of the policy without any additional premium. This all-in-one insurance
solution is designed to protect financial institutions from a wide range of risks related to
their operations and assets.
13. Cash Insurance
Cash-in-Transit Insurance is essential for businesses handling money, protecting against
losses during transit or within premises. It covers theft, robbery, burglary, and losses from
dishonesty by authorized personnel within 72 hours. Coverage includes cash in safes,
vaults, or on staff, with specified security measures like guards, CCTV, and secured
safes. Optional extensions for Terrorism Risks (RSMDST) are available. Exclusions
include natural disasters, accounting errors, unattended vehicles, and unauthorized
handling. Deductibles apply based on claim type. Policy issuance requires a completed
proposal form, PAN, KYC, and other necessary documents.
14. Group Medical Insurance
Group Medical Insurance reimburses medical expenses for insured individuals due to
accidental injuries or illnesses, covering treatments at home or in hospitals. It includes only
allopathic treatments by certified doctors, with exceptions for Ayurvedic or Homeopathic
12
treatments in cases of jaundice. Coverage is primarily limited to Nepal, but treatments in
SAARC countries are allowed if recommended by the treating doctor due to unavailability
in Nepal. Additionally, treatments in nearby Indian cities are permitted if the facilities are
closer than those in Nepal.
15. Public Liability Insurance
Public Liability Insurance safeguards businesses by covering compensation and legal
costs for third-party injuries (including death) or property damage caused by business
operations. It is essential for various sectors, including manufacturing, construction,
storage facilities, hospitality, offices, educational institutions, hospitals, research labs,
airport premises (excluding aviation liability), cinemas, malls, stadiums, and events like
exhibitions and fairs. This insurance ensures businesses can operate without financial
strain from liability claims.
2.4 Departments of the Company
Shikhar Insurance Company Limited has multiple departments to facilitate the smooth execution
of its operations and effectively achieve its business goals. Each department is essential in driving
the company's success and contributes significantly to its overall performance. Below is a
summary of the main departments within the organization:
1. Underwriting Department
Underwriting is a critical department within an insurance company that assesses and
manages the risks associated with the issuance of insurance policies. The primary
responsibility of the underwriting team is to evaluate the risks of insuring potential clients
and determine the terms, conditions, and premium rates for their insurance policies. This
process involves analyzing a variety of factors, including the applicant's history, risk
profile, and the specifics of the coverage being requested. The underwriting department
plays a key role in ensuring the company remains financially stable by carefully balancing
risk with profit. They work closely with sales teams to ensure that the policies align with
the company's risk tolerance and profitability goals.
2. Claims Department
The Claims department is responsible for managing all aspects of insurance claims, from
the initial report through to the settlement process. Once an incident occurs that triggers a
policyholder's claim (such as an accident, property damage, or medical event), the Claims
13
department steps in to assess the validity of the claim, the extent of the damage, and the
amount of compensation to be paid. Their tasks include investigating claims, liaising with
policyholders, ensuring that the terms of the policy are met, and maintaining accurate
records. Efficiency, transparency, and customer service are key aspects of the Claims
department’s role, as they are directly involved in ensuring customer satisfaction and
maintaining the company's reputation.
3. Reinsurance Department
Reinsurance is a crucial risk management tool for insurance companies. The Reinsurance
department helps the company manage the risks associated with large claims or unexpected
losses by transferring some of the financial risk to another insurance company, known as
the reinsurer. This helps to protect Shikhar Insurance from potentially catastrophic losses
by spreading risk. Reinsurance agreements are tailored to the company's needs and can
involve different types of contracts, such as facultative reinsurance (covering specific
policies) or treaty reinsurance (covering a group of policies). The Reinsurance department
works closely with other departments to assess risk exposure and determine appropriate
reinsurance coverage.
4. Accounts and Finance Department
The Accounts and Finance department is responsible for managing the company’s financial
health. This department handles budgeting, financial reporting, cash flow management, and
financial analysis. It ensures the company’s compliance with accounting standards and
regulations while providing insights into the company’s profitability and financial position.
The department tracks income from premiums, expenses, and investment returns, and
ensures that all financial transactions are accurately recorded and reported. Additionally,
they prepare financial statements, manage tax liabilities, and work with auditors to ensure
transparency and accountability. Financial stability and profitability are the main objectives
of this department, as they ensure that the company can continue to meet its obligations to
policyholders and stakeholders.
5. Risk and Actuarial Department
The Risk and Actuarial department is responsible for assessing, measuring, and managing
risks across the organization. This includes evaluating both internal and external risks that
may impact the company's operations, such as underwriting risk, operational risk, market
14
risk, and liquidity risk. Actuaries in this department use advanced mathematical and
statistical methods to analyze historical data, estimate future risks, and calculate reserves
to ensure the company can meet its future obligations to policyholders. The department
also plays a key role in setting appropriate pricing strategies, determining capital
requirements, and advising the management team on risk-related decisions. This
department’s work is fundamental to the financial stability of the company.
6. Legal or Anti-Money Laundering (AML) Department
The Legal or AML department is responsible for ensuring the company complies with all
relevant laws, regulations, and industry standards. This includes managing legal risks,
handling contracts, resolving disputes, and providing legal advice to various departments
within the company. The department also ensures the company adheres to Anti-Money
Laundering (AML) laws, which are designed to prevent the company from being used for
illegal financial activities such as money laundering or terrorist financing. They implement
policies and procedures to detect and report suspicious activities, ensuring the company
maintains a high standard of legal and regulatory compliance.
7. Renewal Department
The Renewal department manages the process of renewing insurance policies as they
approach their expiration dates. This includes reviewing existing policies, evaluating any
changes in the client’s circumstances, and adjusting the terms and conditions of the
insurance coverage as needed. They also play a crucial role in customer retention by
ensuring that clients are notified of upcoming renewals, providing options for policy
updates or changes, and addressing any questions or concerns from policyholders. Efficient
management of policy renewals helps ensure continued coverage for clients and consistent
revenue for the company.
8. Health Department
The Health department focuses on providing insurance products related to healthcare, such
as medical insurance, health plans, and wellness programs. This department manages the
underwriting and claims processes for health-related insurance policies, ensuring that
policyholders receive the necessary coverage for medical expenses, hospital stays, or other
health-related incidents. They also work to stay up-to-date with healthcare regulations and
trends, adjusting insurance products to meet the evolving needs of clients. With the
15
increasing demand for health insurance and medical services, this department plays an
essential role in promoting public health and well-being through its offerings.
9. Agriculture and Micro Department
The Agriculture and Micro department provide insurance solutions for farmers and smallscale businesses in rural or underprivileged areas. Agricultural insurance covers risks
associated with crop failure, livestock diseases, and natural disasters, helping to stabilize
the livelihoods of farmers. Micro-insurance products are designed for low-income
individuals who might not have access to traditional insurance. These products offer
affordable coverage for health, life, or property risks. This department is crucial in
promoting financial inclusion and offering protection to underserved sectors of society,
fostering stability in agricultural communities and micro-enterprises.
10. Marketing Department
The Marketing department is responsible for promoting the company’s products and
services, building brand awareness, and driving sales growth. This department designs and
implements marketing campaigns, conducts market research, and develops strategies to
attract new customers and retain existing ones. They also focus on digital marketing, social
media engagement, and customer communication to reach a broader audience. The
Marketing team works closely with other departments to ensure the company’s offerings
align with market demand and customer expectations, playing a key role in shaping the
company’s public image and competitive position in the market.
11. Administrative Department
The Administrative Department at Shikhar Insurance Company is essential for ensuring the
smooth and efficient operation of the organization. It manages office logistics, coordinates
schedules, and provides support for internal and external communication. This department
is responsible for maintaining employee records, overseeing document management, and
organizing meetings and events. It plays a key role in supporting compliance efforts,
managing budgets for office-related expenses, and handling vendor relationships. By
ensuring that operational tasks run seamlessly, the Administrative Department enables
other departments to focus on their core functions and contributes to the overall efficiency
of the company.
16
Each department at Shikhar Insurance Company Limited is integral to the company's ability to
deliver exceptional services, foster customer trust, and maintain a solid financial foundation. By
working in synergy, these departments play a key role in driving the company’s growth and
ensuring its resilience in a competitive and rapidly changing insurance landscape.
2.5 Present Situation
Present Status of Shikhar Insurance Company Limited
Shikhar Insurance Company Limited is a leading player in Nepal's insurance sector, holding
approximately 14% of the market share in insurance premiums. Over the past two decades, the
company has demonstrated remarkable growth and performance, having processed over 100,000
claims and paid claims amounting to over 20 billion rupees.
A trailblazer in the industry, Shikhar became the first insurance company in Nepal to achieve a
paid-up capital of 2.5 billion rupees without undergoing any mergers, showcasing its strong
financial foundation and organic growth. The company has also maintained a legacy of shareholder
satisfaction, distributing an impressive 295% in dividends over 20 years.
Shikhar boasts an extensive network of over 100 branches and has played a pivotal role in
strengthening the insurance industry by training and employing more than 600 skilled
professionals. Its operational excellence and innovative practices have earned it the titles of
Nepal’s Best Managed Insurance Company and Best Insurance Company on six occasions.
In recognition of its commitment to human resource development, Shikhar was honored with the
Corporate Excellence Award and has also been acknowledged by the Internal Revenue
Department as the highest taxpayer in the insurance sector. Furthermore, its contributions to
agricultural and crop insurance were lauded by the Government of Nepal, and it received a special
recognition from the Nepal Reinsurance Company for being the most profitable reinsurance
partner.
Shikhar Insurance continues to set industry benchmarks, combining financial progress, operational
efficiency, and a strong customer-centric approach, making its position as a leader in Nepal’s
insurance landscape.
Strengths
i.
Leading collector of insurance premiums in Nepal since 2012.
ii.
Market shares consistently above 10% since 2012.
iii.
Only company in Nepal with "ICRANP-IR" A+ rating.
17
iv.
Over 113 branches across Nepal.
v.
Employee strength of over 650 employees nationwide.
vi.
Supported by 12 reinsurers, including 5 A-rated companies.
vii.
Largest reinsurance coverage for catastrophic risks at NRs. 700 crores (market average:
NRs. 100 crores).
viii.
Solvency margin of 3.33%, well above the Beema Samiti's minimum requirement of
1.5%.
ix.
Product innovation leader with offerings such as 100% Cashless Health Insurance, Critical
Illness Insurance, Clinical Trial Insurance, Auto Plus Insurance, Secure Mind Insurance,
Hole-In-One Insurance, Apple Insurance, Flood Insurance, and Weather Index Insurance.
2.6 Challenges and Opportunities
2.6.1 Challenges
Shikhar Insurance Company Limited, as a newly merged entity, faces a variety of challenges in
Nepal's competitive life insurance market. These include navigating intense competition, meeting
stringent regulatory capital requirements, managing limited actuarial capacity, and addressing
operational hurdles like ongoing data transfers and system integration necessary for smooth
operations and sustainable growth. They are explained as follows:
1. Regulatory Changes and Compliance: Adapting to evolving regulatory requirements,
such as the implementation of Risk-Based Capital (RBC) frameworks or compliance with
IFRS 17, requires significant time, expertise, and resources. Staying compliant with the
directives of the Nepal Insurance Authority and tax regulations can be demanding.
2. Market Competition: Increased competition from both established and emerging
insurance companies may challenge Shikhar's market share and customer retention.
Potential new entrants or mergers within the industry could intensify the competition.
3. Digital Transformation: Keeping up with advancements in technology to meet customer
expectations for digital services can be costly and complex. Cybersecurity threats and the
risk of data breaches are increasing concerns as the company transitions to more digital
platforms.
4. Economic Volatility: Fluctuations in Nepal’s economic conditions, inflation, and foreign
exchange rates can impact investments, claim payouts, and overall profitability. The
economic slowdown caused by global or local crises could reduce premium collections.
18
5. Underwriting Risks and Claims Management: Managing high claim volumes,
especially during natural disasters, poses financial and operational risks. Ensuring the
adequacy of reserves for claims like IBNR, especially with the growing complexity of
insurance products, can be challenging.
6. Customer Awareness and Penetration: Despite its market leadership, insurance
penetration in Nepal remains low, and educating potential customers about insurance
products can be a hurdle.
2.6.2 Opportunities
Opportunities
1. Expanding Product Portfolio: Developing innovative insurance products such as
parametric insurance or niche products tailored to Nepal's agricultural, tourism, and
hydropower sectors can capture untapped markets. Growth in microinsurance and
inclusive insurance products to serve underserved populations offers vast potential.
2. Technological Advancements: Leveraging technology to enhance customer experience
through mobile apps, online claim processes, and data-driven risk assessment. Adopting
InsurTech solutions for predictive analytics, fraud detection, and operational efficiency.
3. Untapped Market Segments: Expanding services to rural and semi-urban areas by
utilizing its established branch network. Promoting awareness and adoption of crop,
health, and life insurance among Nepal’s largely uninsured population.
4. Reinsurance Partnerships: Strengthening partnerships with international reinsurers to
diversify risks and secure better terms for reinsurance arrangements. Enhancing
profitability through increased focus on reinsurance and risk-sharing models.
5. Recognition and Branding: Leveraging its multiple awards and recognitions to
strengthen customer trust and brand loyalty. Positioning itself as a socially responsible
company through Corporate Social Responsibility (CSR) activities and sustainable
insurance practices.
6. Economic and Infrastructure Growth: Nepal’s economic development and large-scale
infrastructure projects present opportunities for providing specialized insurance products
for construction, energy, and transportation sectors.
7. Regulatory Push for Insurance Growth: Policies encouraging insurance penetration,
such as mandatory insurance for certain sectors, offer opportunities for growth.
19
CHAPTER III
ANALYSIS OF ACTIVITIES DONE AND PROBLEMS SOLVED
3.1 Activities Performed
During her internship at Shikhar Insurance Company Limited, the intern actively engaged in a
wide variety of actuarial and insurance-related tasks, gaining firsthand experience in critical areas
of risk management, regulatory compliance, financial modeling, and data analysis. These activities
were instrumental in deepening her understanding of the general insurance industry while allowing
her to make meaningful contributions to the organization. Below is a detailed account of the
activities:
3.1.1 Development of RBC Implementation Timeline
The intern developed a comprehensive timeline for implementing the Risk-Based Capital (RBC)
framework in compliance with directives from the Nepal Insurance Authority (NIA). This activity
involved:
•
Researching international RBC frameworks and comparing their applicability to Nepal.
•
Engaging with department heads to understand company-specific risk dynamics.
•
Drafting and refining the timeline in collaboration with the appointed actuary to ensure
alignment with regulatory expectations and company operations.
This work provided the foundation for a smooth and structured adoption of RBC within
the company.
3.1.2 Data Cleaning and Analysis for Premiums, Claims, and Reinsurance
The intern performed rigorous data cleaning and analysis to ensure accurate inputs for regulatory
reporting and reserve estimations. This involved:
•
Reviewing large datasets to identify and rectify discrepancies in policy, claims, and
reinsurance records.
•
Preparing cleaned datasets for use in actuarial calculations such as Incurred But Not
Reported (IBNR) and Incurred But Not Enough Reported (IBNER) reserves.
•
Liaising with relevant departments to confirm data accuracy and completeness.
The outputs supported the actuary in preparing accurate reserves and enhancing the
reliability of financial reports.
20
3.1.3 Preparation of Risk Register and Risk Matrix
The intern developed a comprehensive risk register and matrix to document and categorize the
risks associated with the company’s operations. The tasks included:
•
Conducting workshops with risk officers from different departments to gather risk data.
•
Categorizing risks into operational, financial, strategic, and compliance-related risks.
•
Linking these risks to the RBC framework and ORSA (Own Risk and Solvency
Assessment) policies for integrated risk management.
This activity enhanced the company’s preparedness to address current and potential risks.
3.1.4 Investment Present Value and Duration Calculator for QRRT Reporting
The intern designed and implemented investment models to calculate the Present Value (PV) of
assets under non-stressed, up-stressed, and down-stressed scenarios, as required for Quantitative
Regulatory Reporting Templates (QRRT).
Bank
S.No Name
Frequency of
interest (in
days)
Interest
amount per
frequency
Maturity
amount
Maturity Date
(in AD
Asset
mm/dd/yyyy) class
Calculate
Calculate
Remaining
PV no
Term in years stress
PV up
stress
Calculate
Calculate
PV down
stress
Duration
Fig 3.1: Template of the calculator
This Investment PV and Duration Calculator for QRRT Reporting template is designed to assess
and report the performance and risk of investments, particularly in a regulatory or compliance
framework. Here's a more detailed breakdown of each column and its purpose:
S.No:
This is a simple serial number used for tracking and referencing individual investments within the
list. It ensures clarity and organization in large datasets.
Bank Name:
The name of the financial institution where the investment is held. This helps in identifying the
counterparties and diversifying investment portfolios across institutions.
Frequency of Interest (in days):
Specifies how often the investment pays interest. For example:
30 days: Monthly payments.
90 days: Quarterly payments.
365 days: Annual payments.
This is critical for calculating the cash flows and interest payments accurately.
Interest Amount per Frequency:
21
The actual amount of interest earned during each payment period. It is calculated based on the
investment’s principal amount, interest rate, and frequency. This helps in understanding the
periodic income from the investment.
Maturity Amount:
The total sum that will be received when the investment reaches its maturity date. It typically
includes the principal amount and any final interest payment.
Maturity Date (in AD mm/dd/yyyy):
The exact date when the investment matures. This is used to determine the remaining term and
calculate the present value.
Asset Class:
Categorizes the investment into its asset type, such as:
Fixed Deposits
Government Bonds
Corporate Bonds
Asset class categorization is vital for regulatory reporting and understanding the risk-return profile
of the investment.
Remaining Term in Years:
This indicates the time left until the investment matures. It is calculated as the difference between
the current date and the maturity date, expressed in years. This is important for assessing the time
value of money.The formula for Remaining Terms in Years is :
𝑅𝑒𝑚𝑎𝑖𝑛𝑖𝑛𝑔 𝑇𝑒𝑟𝑚𝑠 𝑖𝑛 𝑦𝑒𝑎𝑟𝑠 =
𝑀𝑎𝑡𝑢𝑟𝑖𝑡𝑦 𝑑𝑎𝑡𝑒 − 𝑉𝑎𝑙𝑢𝑎𝑡𝑖𝑜𝑛 𝐷𝑎𝑡𝑒
365
PV No Stress:
The Present Value (PV) is the current worth of future cash flows, discounted at the appropriate
interest rate. This column represents the PV under normal conditions (i.e., without any stress
applied). It reflects the investment's value under expected market conditions.
𝑛
𝑃𝑉 𝑁𝑜 𝑆𝑡𝑟𝑒𝑠𝑠 = ∑(
𝑡=1
𝐶𝑎𝑠ℎ𝑓𝑙𝑜𝑤
)
(1 + 𝑅𝑖𝑠𝑘 𝐹𝑟𝑒𝑒 𝑅𝑎𝑡𝑒)𝑡
22
PV Up Stress:
This represents the PV of the investment under an upward stress scenario, such as an increase in
interest rates. Higher interest rates reduce the PV of cash flows, as the discount rate increases. This
helps in assessing the potential downside risk to the investment.
𝑛
𝐶𝑎𝑠ℎ𝑓𝑙𝑜𝑤
)
𝑃𝑉 𝑈𝑝 𝑆𝑡𝑟𝑒𝑠𝑠 = ∑ (
(1 + 𝑅𝑖𝑠𝑘 𝐹𝑟𝑒𝑒 𝑅𝑎𝑡𝑒 + 𝑈𝑝 𝑆𝑡𝑟𝑒𝑠𝑠 𝑅𝑎𝑡𝑒)𝑡
𝑡=1
PV Down Stress:
This represents the PV under a downward stress scenario, such as a decrease in interest rates.
Lower interest rates increase the PV of cash flows. This is useful for understanding how the
investment’s value might increase in a more favorable market.
𝑛
𝐶𝑎𝑠ℎ𝑓𝑙𝑜𝑤
)
𝑃𝑉 𝑈𝑝 𝑆𝑡𝑟𝑒𝑠𝑠 = ∑ (
(1 + 𝑅𝑖𝑠𝑘 𝐹𝑟𝑒𝑒 𝑅𝑎𝑡𝑒 − 𝐷𝑜𝑤𝑛 𝑆𝑡𝑟𝑒𝑠𝑠 𝑅𝑎𝑡𝑒)𝑡
𝑡=1
Duration:
This is a measure of the investment’s sensitivity to interest rate changes. It is the weighted average
time to receive all cash flows (both interest and principal). Investments with higher durations are
more sensitive to interest rate changes, which is crucial for managing interest rate risk.
𝑡 ∗ 𝑐𝑎𝑠ℎ𝑓𝑙𝑜𝑤
∑𝑛𝑡=1 (
)
(1 + 𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑟𝑎𝑡𝑒)𝑡
)
𝐷𝑢𝑟𝑎𝑡𝑖𝑜𝑛 = (
𝑇𝑜𝑡𝑎𝑙 𝑃𝑉
3.1.5 Reserve Estimation Using Actuarial Methods
The intern applied various methodologies to estimate reserves, including:
•
Chain Ladder Method: To identify trends in claims development and project future
liabilities.
•
Bornhuetter-Ferguson Method: To combine historical claims data with prior estimates
for better accuracy.
•
Average Cost Per Claim Method: For simpler, straightforward calculations of reserves.
These techniques ensured the company maintained adequate reserves to cover its liabilities,
meeting regulatory standards.
3.1.6 Reinsurance Optimization Study
The intern analyzed reinsurance treaties and simulated scenarios to determine cost-effective risksharing strategies. Specific tasks included:
23
•
Evaluating the financial impact of existing reinsurance treaties on the company’s
profitability.
•
Suggesting alternative treaty structures to enhance cost efficiency and reduce exposure to
catastrophic risks.
•
Presenting findings to the senior management for informed decision-making.
This study contributed to optimizing the company’s risk transfer strategies.
3.1.7 Power BI Dashboard Development
The intern created interactive dashboards in Power BI to visualize claims and reinsurance data,
enabling:
•
Real-time tracking of claims trends and reinsurance performance.
•
Identification of anomalies or inefficiencies in the claims process.
•
Easy interpretation of complex data through user-friendly visualizations like bar charts
and pivot tables.
This tool improved the team’s ability to monitor and analyze data effectively.
3.1.8 Automation of QRRT Reporting
Collaborating with the IT team, the intern worked on automating parts of the QRRT reporting
process. Her responsibilities included:
•
Identifying repetitive tasks within the reporting workflow and designing automated
solutions.
•
Developing templates for streamlined data input and validation.
•
Testing the automated system to ensure accuracy and compliance with regulatory
standards.
The automation reduced manual errors and increased the efficiency of regulatory reporting.
3.1.9 Analysis of Financial Statements
To deepen her understanding of the company’s financial health, the intern reviewed past financial
statements, focusing on:
•
Assessing trends in underwriting performance, investment returns, and reserve adequacy.
•
Identifying key drivers of profitability and areas of concern.
•
Preparing an impact analysis to evaluate how changes in financial data affected reserves
and solvency calculations.
This analysis provided valuable insights into the company’s financial strategies.
24
3.1.10 Training and Knowledge Enhancement
The intern attended training sessions on IFRS 17 and carbon trading to understand their
implications for the insurance sector. The intern also explored the potential for sustainability
initiatives, positioning the company to integrate climate-related considerations into its operations.
3.1.11 Market Research and Presentation to the Senior Management
The intern prepared the presentation with the market data and presented the data analysis of the
data to the senior management of the company. Some data visualization they presented were:
Premium Income
Premium Growth: Non life Insurance
43.0
41.0
39.0
37.0
35.0
33.0
31.0
29.0
27.0
25.0
40.5
39.3
41.2
31.6
27.6
19/20
20/21
21/22
Fiscal Year
22/23
23/24
Premium Income in billions
Source: Nepal Insurance Authority
Fig 3.2: Premium Growth of Non Life Insurance
From fig 3.2 the premium income for non-life insurance has shown a consistent upward trend from
FY 19/20 to FY 23/24. Starting from NPR 27.6 billion in FY 19/20, it has increased to NPR 41.2
billion in FY 23/24. This growth indicates a expansion in the non-life insurance sector, likely
driven by increasing market penetration, rising awareness, and economic growth.
The year-on-year growth slowed slightly between FY 22/23 and FY 23/24, suggesting potential
market saturation or other external factors impacting growth rates.
25
Portfolio wise Premium Share in 80/81
0.00046%
5%
11%
25%
17%
5%
6%
31%
Property
Marine
Aviation
Motor
Engineering
Miscellaneous
Agriculture
Micro
Source: Nepal Insurance Authority
Fig 3.3: Porfolio wise Premium Share in 80/81
In Fig 3.3 of Portfolio wise Premium Share the largest segment is the Motor portfolio, accounting
for 31% of the total premium. Other significant contributors include Property (25%), Engineering
(17%), and Miscellaneous (11%).
Agriculture and Aviation have smaller shares, while Micro insurance has an almost negligible
share (0.00046%).
The dominance of the Motor portfolio highlights the heavy reliance on motor insurance within the
non-life insurance sector. The low contribution from Micro insurance suggests that insurers have
limited exposure to low-income segments or underserved regions, which may also be because
microinsurance companies specialize in providing services and dominate this field. Diversification
into smaller segments like Agriculture and Micro insurance could help insurers mitigate risks and
expand their market reach.
26
Combined Ratio Comparison
250%
234%
218%
208%
200%
208%
189%
158%
150%
134%
127%
121%
113%
109%
93%
100%
91% 88%
82%
80%
73%
71%
70%
91%
69%
74%
91%
81%
80%
50%
0%
2018-19
2019-20
Shikhar Ins.co
Siddhartha Premiere Ins.
2020-21
2021-22
IGI Prudential Ins.
Sagarmatha Lumbini Ins.
2022-23
United Ajod
Source: Financial Statements of the Companies
Fig.3.4: Combined Ratio Comparison
As the combined ratio is a key performance metric in the insurance industry used to measure the
profitability of an insurance company's underwriting operations. It is the sum of the loss ratio and
the expense ratio, expressed as a percentage of the earned premiums.The combined ratio is
calculated as :
𝐶𝑜𝑚𝑏𝑖𝑛𝑒𝑑 𝑅𝑎𝑡𝑖𝑜 =
𝐿𝑜𝑠𝑠 𝑖𝑛𝑐𝑢𝑟𝑟𝑒𝑑 + 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠 𝑖𝑛𝑐𝑢𝑟𝑟𝑒𝑑
∗ 100%
𝑃𝑟𝑒𝑚𝑖𝑢𝑚 𝐸𝑎𝑟𝑛𝑒𝑑
In Fig 3.4 , combined ratios vary significantly among companies, with some showing extremely
high ratios (e.g., United Ajod exceeding 200% in multiple years).
Companies like Shikhar Insurance and IGI Prudential maintain lower combined ratios, consistently
under 100%, indicating better operational efficiency and profitability.
The trends across fiscal years reveal fluctuations, possibly due to market conditions, claim
patterns, or underwriting practices. The relatively stable performance of companies like Shikhar
and IGI Prudential demonstrates effective cost control and underwriting discipline.
27
3.2 Skills Learnt
The internship enabled the intern to gain and refine several key technical and professional skills:
•
Proficiency in solvency valuation models, regulatory compliance, and reserve calculations.
•
Enhanced understanding of data analysis, including cleaning and interpreting actuarial data
for decision-making.
•
Development of financial models for investment valuation under varying stress scenarios.
•
Collaboration and communication skills from working with multidisciplinary teams.
3.3 Challenges Faced and Solved
i. Adapting Theoretical Knowledge to Practical Applications
The intern initially found it challenging to apply theoretical knowledge to tasks like solvency
valuations. Through guidance from colleagues and hands-on practice, she successfully bridged this
gap.
ii. Managing Multiple Projects
Balancing tasks with overlapping deadlines was a challenge. The intern addressed this by
prioritizing tasks and implementing a structured time management system.
iii. Understanding Complex Regulations
Staying updated with NIA’s evolving directives posed a challenge. Dedicating time to studying
regulations and consulting with senior staff helped overcome this hurdle.
3.4 How Could More Experience Be Gained?
Greater exposure to multiple departments and unrestricted access to broader datasets could have
provided a more holistic understanding of the company's operations and improved analytical
depth.
3.5 How Could the Intern Have Done the Work Better?
•
Improved Time Management: A detailed schedule for overlapping tasks could have
enhanced efficiency.
•
Proactive Collaboration: Engaging more with cross-functional teams could have broadened
insights.
•
Expanding Data Access: Accessing more internal datasets for independent analysis could
have deepened technical expertise.
28
3.6 How Will This Experience Help the Intern in the Future?
•
Enhanced skills in actuarial analysis and regulatory reporting will prepare her for future
roles in actuarial science.
•
Improved understanding of risk management frameworks, product pricing, and reinsurance
optimization will contribute to her career development.
•
Hands-on experience with tools like Power BI and Excel strengthens her technical
foundation for advanced financial modeling.
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CHAPTER IV
CONCLUSIONS AND SUGGESTIONS
4.1 Conclusion
The three-month internship at Shikhar Insurance Company Limited has been a transformative
experience for the intern, providing valuable exposure to the general insurance industry in Nepal.
The internship bridged the gap between theoretical knowledge gained through academic studies
and its practical application in a corporate setting. Through active participation in tasks such as
reserve estimations, regulatory reporting, reinsurance optimization, and risk management, the
intern gained hands-on experience in actuarial science.
This experience also enhanced the intern's technical and analytical skills, including data cleaning,
solvency valuation modeling, and financial reporting. Working closely with industry professionals
fostered a deeper understanding of the complexities of the insurance business and highlighted the
importance of collaboration, effective communication, and adaptability in a professional
environment.
The opportunity to engage in impactful projects like RBC and ORSA framework development and
QRRT reporting has not only strengthened the intern’s confidence but also reinforced her
aspiration to pursue a career in the actuarial field. The internship has equipped her with practical
knowledge and skills essential for future success in the industry.
4.2 Fulfillment of Objectives
The primary objective of the internship was to apply theoretical actuarial concepts in a professional
environment, which was successfully achieved. The intern gained extensive exposure to tasks such
as reserve calculations using methodologies like Chain Ladder and Bornhuetter-Ferguson,
reinsurance optimization, risk register preparation, and solvency valuations. These experiences
provided a clear understanding of how classroom knowledge is applied to real-world challenges,
making the internship a significant stepping stone for the intern's career.
4.3 Suggestions to the Organization
Based on her experience, the intern has the following suggestions for Shikhar Insurance
Company Limited:
i. The company could develop an in-house automation tool for QRRT reporting, reducing manual
effort and enhancing reporting accuracy and efficiency.
30
ii. Investing in training programs for actuarial staff would build technical expertise in areas such
as reserve modeling and risk-based valuation.
iii. Further refinement of the company’s data management systems could minimize errors in data
used for regulatory reporting and reserve calculations.
iv. Developing a structured mentorship program for interns would help them navigate complex
tasks and maximize learning opportunities.
4.4 Suggestions to the College
The intern also proposes the following suggestions to her academic institution:
i. Organizing workshops on regulatory frameworks like RBC and IFRS 17 would better prepare
students for internships in the insurance sector.
ii. Encouraging internship-based projects to bridge the gap between theoretical knowledge and
practical applications.
iii. Facilitating interactions between students and industry professionals to provide a clearer
understanding of workplace expectations and trends in the actuarial field.
31
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