Insurance Regulatory and Development Authority (Irda) is planning a to shift the insurance companies to a risk -based solvency model from a factor based solvency model, as practiced now. The insurance regulator has set up a committee headed by an actuary for this purpose and it will present a report on the same to the Irda chairman by January.
Speaking on the sidelines of a BOAO Forum for Asia-FICCI Summit, Radhakrishnan Nair, Member (Finance & Investment), Irda said, "As we have Basel III norms for the banking sector, there are Solvency II norms internationally for insurance companies. Since, we now have factor-based solvency being followed in India, Irda wants to move gradually towards a risk-based solvency." Nair added that though this would not be an exact replica of the Solvency II norms, but will follow the broader parameters of the norms in US, UK, Canada and other such countries.
|Insurance Regulatory and Development Authority (Irda) not keen to increase equity investment cap for private insurance companies. The present cap stands at 10% for private insurers. Radhakrishnan Nair, Member (Finance & Investment), Irda said that revision in limit can only be facilitated if there is a change in the Insurance Act|
|"Insurance Act is the mother act of Irda. Only if there is a modification in the act, can the investment cap of 10 per cent be hiked," he said, on the sidelines of a FICCI-BOAO Forum for Asia Summit|
|Life Insurance Corporation of India (LIC) has been allowed to invest upto 30 per cent, as per a notification by the Finance Ministry|
Solvency II refers to a common set of rules to be applicable to European Union's (EU) insurance industry. These norms are made up of provisions related to capital requirements for the companies, regulatory assessment of a specific firm's risk, as well as the regulator's broader supervision of the entire marketplace. Solvency II has not yet come into force in EU.
The committee is composed of experts from the insurance sector and would prepare a report on both life and non-life insurance industry. However, Nair said that there would be an effort to ensure that there would be no dilution in the regulatory capital requirement. The present solvency margin stands at 150 per cent for insurers.
Nair further said that the model would involve some risk management by the company and help maintain a standardised model and appropriate risk-based pricing. Post the presentation of the report, the committee will have a procedure to run it (new model) through the present model of major insurance companies.