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The public sector insurance companies – Life Insurance Corporation of India (LIC), General Insurance Corporation of India (GIC Re) and the New India Assurance Company continue to be identified as Domestic Systemically Important Insurers (D-SIIs) by the Insurance Regulatory and Development Authority of India (IRDAI).
“LIC, GIC Re, and New India continue to be identified as Domestic Systemically Important Insurers (D-SIIs), as in the 2022-23 list of D-SIIs,” IRDAI said.
D-SIIs are insurance companies which are perceived as ‘too big or too important to fail’ (TBTF) based on their size, market importance, and domestic and global interconnectedness.
LIC and New India are the largest life and general insurance companies in the country, respectively. Meanwhile, GIC Re is the sole Indian reinsurer.
The distress or failure of these D-SIIs would lead to 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.
The perception and the perceived expectation of government support by these entities is likely to amplify risk-taking, reduce market discipline, create competitive distortions and increase the possibility of distress in the future.
It is due to these considerations that D-SIIs are subjected to additional regulatory measures to deal with systemic risks and moral hazard issues with an increased level of corporate governance and the need for these insurers to identify all relevant risks and promote a sound risk management framework and culture.
