IRDAI Eases Solvency Margin Requirement for Crop Insurance and Reduces Compliance Burden
The Insurance Regulatory and Development Authority of India (IRDAI) on Tuesday in its reform package announced that it would reduce the solvency margin requirement for general insurers carrying on agricultural business, thereby freeing up capital of one value of Rs 1,400 crore.
According to a press release from the insurance regulator, this decision by IRDAI should increase the ability of general insurers to write more business.
IRDAI, in a statement, said: “It is expected that the effect of this easing will be positive on the industry as it will free up capital, which can be used to underwrite more business. It is estimated that around Rs 1,400 crore will be released and general insurers could take advantage of this opportunity to leverage this released capital so as to increase insurance penetration in India.
Since FY18, IRDAI has relaxed the deadline for qualifying state premiums for calculating solvency from 180 days to 365 days. However, as of now, the insurance regulator has decided to extend this easing from FY23 until further orders.
“This decision will improve the solvency of the general insurance industry as a whole,” the regulator said.
The insurance regulator also added that premiums receivable related to state/central government sponsored schemes for all quarters of FY23 and onwards to the extent not realized within 365 days will be placed with a value of zero.
In addition to this, the insurance regulator, in its continuous efforts to promote the ease of doing business for insurance companies in the country, has also reviewed and streamlined the regulatory filings to be filed by insurance companies.
IRDAI, in its latest circular, reduced offline returns submitted by life insurers from 40 to just 4, while online returns fell from 8 to 5. Additionally, it also consolidated three requirements of separate certifications into one.
The regulator’s move comes after it extended similar relaxations to general insurers and health insurers respectively. IRDAI had also stopped submitting hard copies of any report, statement or other document related to the actuarial valuation or reinsurance.
IRDAI expects that a reduced compliance burden will allow insurers to better focus their efforts and time on reaching every Indian to improve coverage and penetration.