Irdai names LIC, GIC as 'domestic systemically important' insurers

Insurance regulator on Friday identified Life Insurance Corporation (LIC), New India Assurance, and General Insurance Corporation (GIC Re) as domestic systemically important insurers (D-SIIs) for 2022-23. 

These were the same institutions that were identified as DSII in 2021-22. 

D-SIIs refer to insurers of such size, market importance, and domestic and global interconnectedness, whose distress or failure would cause a significant dislocation in the domestic financial system. 

Therefore, the continued functioning of D-SIIs is critical for the uninterrupted availability of insurance services to the national economy, Insurance Regulatory and Development Authority of India said. 

Since these institutions have been identified as D-SIIs, they have to raise the level of corporate governance; identify all relevant risks and promote a sound risk management framework and culture.

D-SIIs, typically, are subjected to additional regulatory measures to deal with systemic risks and moral hazard issues.

Generally, D-SIIs are perceived as insurers that are ‘too big or too important to fail’. “This perception and perceived expectation of government support may amplify risk-taking, reduce market discipline, create competitive distortions, and increase the possibility of distress in the future”, Irdai said.