Irda Likely To See Risk-Based Capital Norms In 4 yrs

Mumbai: The insurance industry likely to see moves to shift to risk-based capital norms in the next three to four years from the current solvency margin regime. Insurance companies, at present, are required to maintain a solvency margin where the excess of capital of an insurance company plus the value of assets should be 150 per cent of insured liabilities.
According to the source, solvency is a serious prudential issue. As risks in markets increase, the solvency level goes up. It is likely that when risk-based capital norms are introduced, the solvency margin requirements may actually increase to 200 per cent as seen in many jurisdictions abroad. The matter of adopting global practices in bringing adequate solvency ratio practices to the insurance industry in India, is being studied and suitable decisions in this regard will be taken in due course.The insurance industry (life and non-life combined) will have total capital of Rs 10,000 crore by 2008. As on March 31 2006, the life insurance industry's capital base was Rs 6422 crore. During April-December 2006, over Rs 1,500 crore of capital was infused by the 14 life insurance players, taking the life insurance industry's total capital base to over Rs 8,000 crore.