At present, it is mandatory to maintain a solvency margin of 150% for every insurer, irrespective of the amount of risks that the promoting entities of the insurer carry or the extent of liabilities that arise from the pricing of the insurance policies
MUMBAI : The Insurance Regulatory and Development Authority of India or Irdai chairman S C Khuntia, on Thursday, said the regulator is planning to introduce a new risk-based solvency system and strengthen risk-management rules in order to ensure that the insurance firms are equipped with better capital adequacy to deal with socio-economic shocks such as the covid-19 pandemic.
“We are going to roll out some important reforms. Risk-based solvency or capital adequacy system will be introduced. We are working on it and we should be able to do it in about three years,” said Khuntia, while addressing the 22nd annual insurance and pension summit organized by the confederation of Indian Industry (CII).
“We are also looking to introduce risk-based supervision norms, which is required so that those companies which carry higher risks get more supervision. We want insurers to become more cost efficient, protect capital conservation ratio, preserve solvency and have a business continuity plan. New accounting standards will also be implemented from 1 January 2023. We may delay it by a year or two but the insurance companies have to start preparing themselves from this year itself,” said Khuntia.
Source: livemint
