IRDAI identifies LIC, GIC, New India Assurance systemically important insurers
Context: 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.
- “D-SIIs will also be subjected to enhanced regulatory supervision,”.
- 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.
- “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,”
- 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.
1.png)
