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IRDA To Share Information With Global Peers On Insurance Sector

Posted on May 22, 2013 by
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Strengthening its international co-operation, Insurance Regulatory and Development Authority (IRDA) has joined its hands with some of its global peers for sharing and exchange of sectoral information.

IRDA has become a signatory to the global supervisory cooperation and information exchange agreement under the aegis of International Association of Insurance Supervisors (IAIS).

There are now 37 jurisdictions admitted as signatories to the IAIS Multilateral Memorandum of Understanding (MMoU), representing more than 54% of worldwide premium volumes.

The pact is a global framework for co-operation and information exchange between insurance supervisors. Besides, it sets minimum standards for signatories.

Through membership in the MMoU, jurisdictions are able to exchange relevant information with and provide assistance to other member jurisdictions, thereby promoting the financial stability of cross-border insurance operations for the benefit and protection of consumers.

Joining the MMOU will further strengthen the supervisory role of the IRDA in the home jurisdiction. Other signatories to this pact include Australia, France, Germany, Japan and the United Kingdom. IAIS represents insurance regulators and supervisors spread across more than 200 jurisdictions.

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IRDA’s provisioning norms pushed insurers a step backward to migrate to Solvency II

Posted on January 11, 2012 by
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Solvency II IndiaAt a time when government has asked insurers to migrate to Solvency II regime Insurance Regulatory and Development Authority’s (IRDA) new provisioning norms has made it difficult task for insurers. European Solvency II standards are expected to come in effect from first January 2013. Hence, government has asked insurers especially those having foreign operations to move to Solvency II regime from next financial year.

 

Solvency is the measure of insurer’s ability to meet claim. Solvency margins are the capital or net worth and excess of the value of assets over insured liabilities.

 

Due to increased provisioning requirements for the third party motor pool public sector insurers have to keep aside approximately Rs 3,500 crore for the current fiscal and private sector insurers will have to bare the extra burden of around Rs 4,000 crore.

 

Due to increased provisioning; Required Solvency Margins (RSM) has been reduced to 1.1 times of insured liabilities against prescribed 1.35 times for current fiscal. That means for every one rupee of business insurer will have to hold the capital of Rs 1.1. The deadline for reaching the RSM of 1.5 times now has been made 2016.

 

Due to this high provisioning; in immediate future none of the insurer is in the position of moving to Solvency II regime. According to solvency II prescribed by European financial regulator RSM will be calculated on dynamic basis. That means assets will be valued on market value basis. At present insurers values assets on book value basis that left them with substantial hidden reserves.

 

IRDA is also not keen for Solvency II. As per IRDA if they adopt the Solvency II regime then they have to follow the International Association of Insurance Supervisors (IAIS) Norms for assessing the value of assets. And IAIS in certain regimes values assets on Mark to Market (MTM) basis which can lead to high fluctuations. Hence, before moving to Solvency II regime IRDA is waiting for the final valuation norms of IAIS.

 

IRDA has also set up committee headed by actuary PA Balasubramanian to assess the impact of Solvency II on Indian insurance industry.

 

IRDA is cautious to adopt Solvency II regime because though prices of all other risk products have been deregulated but motor third party tariffs are still regulated. And Motor third party portfolio is incurring heavy losses on insurer’s books. Claim ratio for motor third party portfolio is 150% that means for every Rs 100 premium collected insurers have to shell out the claim of Rs 150.

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