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

    BCBS Consults on Revised Disclosures for Market Risk Framework

    BCBS launched a consultation on the revised disclosure requirements for the market risk framework for banks.

    November 14, 2019 WebPage Regulatory News
    News

    BCBS Consults on Disclosure Templates of Sovereign Exposures of Banks

    BCBS published a consultation on the voluntary disclosure templates related to sovereign exposures of banks.

    November 14, 2019 WebPage Regulatory News
    News

    PRA Publishes Final Policy on Maintenance of TMTP Under Solvency II

    PRA published the policy statement (PS25/19) that contains the final supervisory statement (SS6/16) on maintenance of the transitional measure on technical provisions (TMTPs) under Solvency II.

    November 14, 2019 WebPage Regulatory News
    News

    FSB Examines Implementation of Resolution Regimes in Financial Sector

    FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions and sets out plans for further work.

    November 14, 2019 WebPage Regulatory News
    News

    IAIS Adopts ComFrame, ICS, and Holistic Framework for Systemic Risk

    IAIS adopted a comprehensive set of reforms—Common Framework (ComFrame), Insurance Capital Standard (ICS) Version 2.0, and Holistic Framework for Systemic Risk—that will enable effective cross-border supervision of insurance groups and contribute to global financial stability.

    November 14, 2019 WebPage Regulatory News
    News

    PRA Publishes Templates for Statistical Disclosures Under Solvency II

    PRA published templates for statistical disclosures, as required under Article 31(2) of the Solvency II Directive.

    November 14, 2019 WebPage Regulatory News
    News

    EC Rule on Calculation of Technical Provisions Under Solvency II

    EC published the Implementing Regulation (EU) 2019/1902 that lays down technical information for calculation of technical provisions and basic own funds for reporting with reference dates from September 30, 2019 until December 30, 2019, in accordance with the Solvency II Directive.

    November 14, 2019 WebPage Regulatory News
    News

    Regulatory Authorities Remark on IAIS Reforms for Insurance Sector

    FSB welcomed the finalization of the IAIS holistic framework for systemic risk in the insurance sector, for implementation in 2020. EIOPA welcomed the adoption of ComFrame, Insurance Capital Standard (ICS) Version 2.0, and the holistic framework for the assessment and mitigation of systemic risk in the insurance sector.

    November 14, 2019 WebPage Regulatory News
    News

    BIS and MAS Launch Innovation Hub in Singapore

    BIS and MAS launched the BIS Innovation Hub Center in Singapore.

    November 13, 2019 WebPage Regulatory News
    News

    FASB Approves Guidance to Assist in Transition to New Reference Rates

    FASB approved an Accounting Standards Update (Topic 848) to provide temporary, optional guidance to ease the potential burden in accounting for, or recognizing the effects of, the reference rate reform on financial reporting.

    November 13, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 4147