Corporate Governance Mechanisms and Their Impact on the Nepalese General Insurance Industry

Abstract

This study aims to examine the influence of corporate governance practices on the performance of Nepal’s general insurance industry. This study covers four major insurance companies: NECO Insurance, Sagarmatha Insurance, Rastriya Beema, and Shikhar Insurance. This study will use a mixed-method approach in which quantitative data will be combined with qualitative findings. Quantitative data will be based on a survey of 233 industry professionals. In addition to this, qualitative findings will be based on 7 in-depth interviews from senior executives and insurance industry experts. The findings have revealed that corporate governance has a strong influence on the performance of Nepal’s general insurance industry. The regression coefficient has been found to be 0.507 (p < 0.001), which indicates a one-unit improvement in corporate governance will lead to a 0.507-unit improvement in the performance of the insurance industry. Board oversight and accountability have a strong influence on the insurance industry’s performance (β = 0.617), while regulatory compliance has a stronger influence (β = 1.023). In contrast, a negative coefficient has been found in the case of disclosure and transparency practices (β = -0.179). NECO Insurance has been found to have a strong correlation between governance frameworks and stable financial performance. This study has found critical challenges in the insurance industry in Nepal. Board interference in operations has been found to be a major challenge (72.1%), followed by passive non-executive directors (73.4%) and recruitment difficulties (70.4%).