Featured Product

    IMF Issues Technical Note on Insurance Sector Regulation in India

    April 02, 2018

    IMF issued a technical note that provides an assessment of the recent development of regulation and supervision of the insurance sector in India. It is part of the 2017 Financial Sector Assessment Program (FSAP) for India. The note focuses on several key developments in the regulation and supervision of the insurance sector since the last FSAP and evaluates the extent to which the recommendations of the 2011 India FSAP have been addressed. The note, however, does not present a full assessment of observance of IAIS Insurance Core Principles (ICPs).

    The staff finds that most of the 2011 FSAP recommendations on insurance regulation have been addressed. Issues with the independence of Insurance Regulatory and Development Authority of India (IRDAI) and overly informal approach in some areas, including solvency control levels and the arrangements for cooperation with other regulatory bodies, have been resolved. Public and private insurers are now subject to the same regulation, although there remain some structural advantages for the public-sector life insurers and reinsurers. Revisions to the key insurance law have transferred powers from government to IRDAI, including wider powers to issue regulations. Key recommendations of the 2017 FSAP include the following:

    • Formulate a strategy, plan, and timetable for modernization of the solvency framework
    • Consider the expected new IFRS 17 on insurance liabilities (as an input into solvency valuation requirements) and the well-advanced new IAIS Insurance Capital Standards to be adapted and recalibrated as necessary for application to the Indian market, or IRDAI could draw on established approaches in other Asian countries (that is, Singapore)
    • Implement only a standardized approach (as internal models are a complex option) to risk-based capital, covering all risks, and require insurers to develop an Own Risk and Solvency Assessment  
    • Move to a more risk-based framework for supervision, which would complement risk-based capital and encourage better risk management
    • Consider further measures to level the playing field for insurers in the limited areas where there are, or may be perceived to be, advantages for public sector insurers

    IRDAI is working with the industry on plans for economic valuation for solvency purposes and risk-based capital. India is an outlier—both in Asia and internationally—in not having moved in this direction so far. The insurance resolution framework appears comprehensive, though untested. IRDAI has decided, in the light of issuance of a final IFRS on insurance liabilities in May 2017 (IFRS 17, due to take effect in January 2021), to defer implementation of Ind AS to coincide with IFRS 17 implementation. Implementation of IFRS from financial year 2020–21 will require a move toward economic valuation for financial statements. IRDAI is monitoring the impact of Ind AS via private reporting. In discussion, insurers noted that the most significant impact of Ind AS would come through IFRS 17.

    The overall insurance penetration in the country remains relatively low and public-sector insurers continue to command a majority of the market. Life insurance predominates, with about 75% of total premiums. Non-life insurance is dominated by motor insurance. Penetration rates remain unchanged from 2011 and are generally lower than in comparator countries, especially in non-life. While traditional sale channels continue to predominate, there is an increasing diversity in distribution. Risks in life insurance are relatively well-spread and in non-life are mainly short-term. The sector is profitable and solvency exceeds minimum requirements, but with exceptions.

     

    Related Link: Technical Note on Insurance Sector

    Keywords: Asia Pacific, India, Insurance, FSAP, Solvency II, IFRS 17, ICS, IRDAI, IMF

    Featured Experts
    Related Articles
    News

    APRA Revises Standard on Margin Rules for Uncleared Derivatives

    APRA revised CPS 226, which is the prudential standard on margin and risk mitigation requirements for non-centrally cleared derivatives.

    September 19, 2019 WebPage Regulatory News
    News

    PRA Issues Consultation on Prudent Person Principle Under Solvency II

    PRA, via the consultation paper CP22/19, has set out its proposed expectations for investment by firms, in accordance with the Prudent Person Principle (PPP).

    September 18, 2019 WebPage Regulatory News
    News

    EIOPA Forms Consultative Expert Group on Digital Ethics in Insurance

    EIOPA established the Consultative Expert Group on Digital Ethics in Insurance to assist EIOPA in the development of digital responsibility principles in insurance.

    September 17, 2019 WebPage Regulatory News
    News

    FDIC Approves Proposal to Amend Swap Margin Rule

    FDIC approved what would be a joint proposal by the US Agencies (FCA, FDIC, FED, FHFA, and OCC) to amend regulations that require swap dealers and security-based swap dealers under the agencies’ respective jurisdictions to exchange margin with their counterparties for swaps that are not centrally cleared (Swap Margin Rule).

    September 17, 2019 WebPage Regulatory News
    News

    FASB Proposes Taxonomy Changes Related to Topics 848 and 470

    FASB proposed taxonomy improvements for the proposed Accounting Standards Update on topic 848 on facilitation of effects of reference rate reform on financial reporting.

    September 16, 2019 WebPage Regulatory News
    News

    BoE Statement on Recalculating Transitional Measures Under Solvency II

    BoE notified that it will be willing to accept applications from firms to recalculate transitional measure on technical provisions (TMTP) as at September 30, 2019.

    September 16, 2019 WebPage Regulatory News
    News

    BIS Hosts Conference to Discuss Issues from Emergence of Stablecoins

    BIS hosted a conference in Basel to discuss policy and regulatory issues posed by the emergence of stablecoin initiatives backed by financial institutions and large technology companies.

    September 16, 2019 WebPage Regulatory News
    News

    BIS Paper on Embedded Supervision of Blockchain-Based Financial Market

    BIS published a working paper that investigates ways to regulate and supervise blockchain-based financial markets.

    September 16, 2019 WebPage Regulatory News
    News

    BoE Paper on Market-Implied Systemic Risk and Shadow Capital Adequacy

    BoE published a working paper that presents a forward-looking approach to measure systemic solvency risk.

    September 13, 2019 WebPage Regulatory News
    News

    HKMA Consults on Policy Module on Pillar 2 Supervisory Review Process

    HKMA is consulting on the revised Supervisory Policy Manual module CA-G-5 that sets out the HKMA approach to conducting the supervisory review process under Pillar 2.

    September 13, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3830