IRDAI rejects general insurers' call for easing of solvency margins

The IRDAI has rejected a request from general insurance companies for a blanket relaxation of solvency margins in the face of the COVID-19 pandemic. However, it said specific cases would be considered on merit.

Last month, the General Insurance Council (GI Council), in a letter to the IRDAI, sought several regulatory relaxations, such as those related to the solvency ratio.

The Council, which represents general insurers, asked for relaxation in calculating available solvency margins (ASM) on account of delays in tenders related to government schemes and delays in receiving subsidies.

The IRDAI said instead, “The authority doesn’t see the need for general relaxation. However, any specific issues would be considered on merit” 

The GI Council had also said that given the huge mark-to-market (MTM) losses in equity investments during March, IRDAI should allow firms not to account for diminution in the value of equity investments while finalising accounts for the financial year ended 31 March 2020.

The regulator responded, “Insurers are required to adhere to the applicable accounting standards framed by ICAI (Institute of Chartered Accountants of India) and the authority’s regulations/circulars on preparation of financial statements and valuation of investments.”

While insurers ignore MTM gains, they are required to regard MTM losses as expenses.

The GI Council had also requested that firms be allowed to consider MTM position as on 29 February 2020 as the basis of computing solvency.

“Alternatively, IRDAI may relax the minimum solvency requirement of 1.5x for the time being,” the letter had suggested. Many firms may see their solvency ratio fall below 1.5 due to the crisis.

Health insurance

On the issue of giving additional time till 1 June for the launch of the standard health insurance policy Arogya Sanjeevani, IRDAI said, “In the present COVID-19 crisis, rolling out the standard health product expeditiously would be in the public interest.” The scheme took effect on 1 April.

Further, on the request to allow a break of up to 60 days for the continuity of benefits in the case of a delay in renewal of health insurance, the regulator said, “30 days are already available for this, which is sufficient. Further, if the renewal date falls during the lockdown period, the authority has also allowed for continuation of the policy without a break.”