Insurance companies will provide advance payments to policyholders affected by the August 26 Bhotekoshi flood, as authorities seek to speed up compensation and reconstruction following the disaster.

The decision was reached after discussions between the Ministry of Finance, Nepal Insurance Authority, insurance and reinsurance companies, and insurance surveyors. The move is intended to provide immediate liquidity to affected businesses and individuals while detailed assessments of major losses are still underway.

Large projects, particularly hydropower plants and other critical infrastructure, can take considerable time to assess because of the scale and complexity of the damage. Rather than waiting for the entire claims process to be completed, insurers will make advance payments against genuine and verified losses.

The approach follows the precedent set after the September 2025 Gen-Z movement, when insurance companies provided advance payments of up to 50% of confirmed claims to affected policyholders.

The Bhotekoshi flood caused extensive damage to hydropower projects, roads and other infrastructure, vehicles, agricultural assets and private property.

Hydropower projects in the Bhotekoshi region with a combined capacity of around 900 MW have reportedly suffered losses estimated at approximately NPR 180 billion in investment value, highlighting the potentially significant insurance exposure from the disaster.

The Finance Ministry has directed authorities to make the claims process faster and less bureaucratic, allowing reconstruction work to begin without waiting for every aspect of the damage assessment to be completed.

The Nepal Insurance Authority will coordinate the deployment of surveyors and work to make the assessment process more transparent and impartial. Foreign experts may also be brought in where specialized expertise is required for large and complex claims.

The Authority will also simplify documentation requirements given the exceptional circumstances. A special task force will monitor Bhotekoshi-related insurance claims and payments, coordinate company liquidity and help accelerate reinsurance reimbursements.

The scale of claims is already substantial. According to the Nepal Insurance Authority, 583 insurance claims had been filed as of September 15, with a combined estimated claim value of NPR 25.87 billion.

Smaller and straightforward claims are expected to be prioritized for faster settlement, while larger claims involving hydropower and major infrastructure will continue to undergo detailed assessment.

The advance-payment mechanism could provide an important financial bridge for affected companies, allowing them to repair damaged assets, restart operations and begin reconstruction before final insurance settlements are completed.

For Nepal's insurance sector, the disaster also represents a major test of claims-processing capacity, liquidity management and the country's reinsurance arrangements.