 "Insurance")
Regulator IRDAI has identified LIC, GIC and New India Assurance as domestic systemically important insurers (D-SIIs) and subsequently decided to subject them to enhanced regulatory supervision.
The three insurers have also been asked to raise the level of corporate governance, identify all relevant risks and promote a sound risk management culture, the Insurance Regulator and Development Authority of India (IRDAI) said in a statement.
"D-SIIs will also be subjected to enhanced regulatory supervision," it added.
D-SIIs refer to insurers of such size, market importance and domestic and global inter-connectedness whose distress or failure would cause a significant dislocation in the domestic financial system.
Therefore, the continued functioning of D-SIIs is critical for the uninterrupted availability of insurance services to the national economy, IRDAI said.
"After analysis of data", IRDAI has identified Life Insurance Corporation of India; General Insurance Corporation of India; and The New India Assurance Co Ltd as D-SIIs for 2020-21.
D-SIIs are perceived as insurers that are 'too big or too important to fail' (TBTF).
"This perception and the perceived expectation of government support may amplify risk taking, reduce market discipline, create competitive distortions, and increase the possibility of distress in future," said IRDAI.
It added that these considerations require that D-SIIs should be subjected to additional regulatory measures to deal with the systemic risks and moral hazard issues.
To identify such insurers and put them to enhanced monitoring mechanism, IRDAI has developed a methodology for identification and supervision of D-SIIs. The parameters, as per the methodology, include the size of operations in terms of total revenue, including premium underwritten and the value of assets under management; and global activities across more than one jurisdiction.
The regulator would identify D-SIIs on an annual basis and disclose the names of these insurers for public information.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
