|Chennai||Rs. 28730.00 (1.13%)|
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The Insurance Regulatory and Development Authority (Irda) plans to shift insurance companies to a risk-based solvency model from the current factor-based solvency model.
The regulator has set up a committee headed by an actuary for this purpose and it will present a report to the Irda chairman by January.
Speaking on the sidelines of a Ficci-BOAO Forum for Asia, Radhakrishnan Nair, member (finance & investment) at 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 although this would not be a replica of the Solvency-II norms, it will follow the broader parameters of the norms in the US, the UK, Canada and other such countries.
Solvency-II refers to a common set of rules applicable to the European Union’s (EU) insurance sector. These 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 the EU.
The committee, comprising experts from the sector, will prepare a report on both the life and non-life insurance segments. However, Nair said that there would be no dilution in the regulatory capital requirement. The present solvency margin stands at 150 per cent.
According to Nair, the model would involve some risk management by a company and help maintain a standardised model and appropriate risk-based pricing. After presentation of the report, the committee will have a procedure to run it (new model) through the present model of major insurance companies.
Not looking to increase investment limit for private insurers: Regulator
The Insurance Regulatory and Development Authority (Irda) is not keen to increase the equity investment cap for private insurance companies. The present cap stands at 10 per cent for private insurers. Radhakrishnan Nair, member (finance & investment) of Irda, said that a 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.
The Life Insurance Corporation of India (LIC) has been allowed to invest up to 30 per cent, according to a notification by the finance ministry.