Insurance regulator Irdai will hire consultancy services for implementation of risk based capital (RBC) regime with an aim to enhance protection of policyholders. The decision to move to the RBC norms from the current solvency principle regime has been taken after recommendations of a panel, which gave its report to the regulator last July, the Irdai had said. The RBC model is expected to be implemented by March 2021.
The current Solvency Regime will continue till switch over to the RBC regime. As per the Insurance Regulatory and Development Authority of India (Irdai), a shift in regime is felt because the current solvency based rules do not help in assessing whether the capital held is adequate enough for the risks inherent in the insurance business. While inviting expression of interest from consultancy service, Irdai said it plans to move towards a RBC regime that is “appropriate and tailored” for Indian insurance industry. “For implementing RBC framework in India, Irdai intends to take support of qualified consultants and thus invites proposals to carry out necessary analysis and India specific studies as needed for the aforesaid project, develop and implement RBC framework…,” the regulator said. The consultant, it said should aim to develop, fine-tune and recommend the RBC framework covering life insurance, general insurance, health insurance, and reinsurance businesses for India as appropriate.
The RBC Committee headed by Dilip C Chakraborty in its report to Irdai suggested that the industry should move ahead with RBC to ensure that capital held by a company will take into account its overall risk profile. “Moving to RBC would also lead to enhanced protection to policyholders where it becomes possible to understand the level of confidence provided by the capital for a given level of risks,” it had suggested. As also, the global insurance industry has moved to RBC regime, the committee in its report said it was time for India to move in that direction.