RMA Imposes Six-Month Moratorium on New Insurance Company Licenses

The Royal Monetary Authority (RMA) has imposed a six-month moratorium on the acceptance and processing of new insurance company licensing proposals, citing ongoing regulatory reforms and the need to ensure the long-term stability and sustainability of Bhutan’s insurance sector.

In its directive, the RMA stated that while it welcomes private sector interest in the insurance industry and recognizes the importance of fostering a competitive financial services sector, it has decided to temporarily suspend the licensing process pending the outcome of broader regulatory and legislative reviews.

According to the Authority, the moratorium will remain in effect until December this year. The move follows the completion of a comprehensive feasibility assessment undertaken by the RMA to evaluate the implications of licensing additional insurance companies in Bhutan’s relatively small financial market.

At the same time, the Authority has submitted a proposal to Parliament seeking amendments to Section 251(b) of the Financial Services Act of Bhutan 2011. Officials indicated that the outcome of the legislative process could significantly influence the future regulatory framework governing insurance licensing and market entry.

“The outcome of the legislative process is expected to have significant implications for the future regulatory and licensing framework governing insurance companies,” the RMA stated.

Experts say the decision reflects a cautious regulatory approach as Bhutan seeks to balance market competition with financial stability.

“Bhutan’s insurance industry remains relatively small compared to larger regional markets, with a limited number of players currently providing life and general insurance services,” says Dorji Om, a financial expert.

“While increased competition could potentially improve product innovation, customer service, and market penetration, regulators must also assess whether the market has sufficient capacity to support additional insurers without creating excessive fragmentation or financial vulnerabilities,” she added.

Observers note that introducing new insurance companies requires careful consideration of factors such as capital adequacy, market demand, solvency requirements, governance standards, risk management frameworks, and consumer protection mechanisms.

“The RMA’s latest move suggests that authorities are seeking to ensure that any future expansion of the sector is supported by an appropriate regulatory architecture,” an insurance agent based in Phuentsholing said.

The moratorium is also expected to provide regulators with time to assess the findings of the recently completed feasibility study and incorporate any necessary policy changes arising from parliamentary deliberations on the proposed amendment to the Financial Services Act.

According to experts, regulatory reviews of this nature are increasingly common globally as financial regulators seek to strengthen resilience and align licensing requirements with evolving market conditions.

The insurance sector plays a critical role in financial intermediation by providing risk protection to households, businesses, and public institutions while also serving as an important source of long-term investment capital within the economy.

As the economy diversifies and major development initiatives such as the Gelephu Mindfulness City (GMC) gain momentum, demand for more sophisticated insurance products and services is expected to increase.

However, experts caution that rapid market expansion without adequate oversight could expose policyholders and the wider financial system to risks if newly established companies are unable to meet prudential requirements or sustain operations over the long term.

The RMA emphasized that the moratorium is temporary and does not signal a permanent halt to market expansion. Upon the expiry of the six-month period, the Authority will conduct a review of prevailing regulatory, legislative, and market conditions before determining whether to lift, extend, or modify the suspension.

Should the moratorium be lifted, the RMA said it will issue a revised licensing framework and invite eligible applicants to submit formal applications in accordance with updated requirements.

While the Authority has not disclosed the number of applications received or the identities of prospective applicants, the latest development highlights the regulator’s intention to pursue a measured and evidence-based approach to financial sector development, ensuring that future growth in Bhutan’s insurance industry remains sound, competitive, and sustainable.

Tashi Namgyal, Thimphu

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