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ANNUAL REPORT 2011-12
These factors came into effect from December 31,
2008 onwards. Further, the life insurers were asked
to submit scrip-wise details of investments available
for arriving at the ‘available solvency margin’ along
with actuarial valuation reports for the year ended
31 st March, 2009 onwards. There have been no
further amendments in the regulations since then.
III.12.3 In case of non-life insurance, the Authority
has made changes in the calculation of Required
Solvency Margin (RSM), which shall be the maximum
of the fi fty crore of rupees (one hundred crore of
rupees in the case of reinsurer); or higher of RSM-1
and RSM-2 computed. The RSM-1 is the Required
Solvency Margin based on net premiums, and shall
be determined as twenty per cent of the amount
which is higher of the Gross Premiums multiplied by
a Factor and the Net Premiums. For the purpose of
calculation of RSM-1, premium of the last 12 months
on rolling basis will be taken into account. The RSM-
2 is the Required Solvency Margin based on net
incurred claims, and shall be determined as thirty per
cent of the amount which is the higher of the Gross
Incurred Claims multiplied by a Factor and the Net
Incurred claims.
III.12.4 In order to promote Health insurance
business and keeping in mind the short term tail of the
Health insurance business, the Authority permitted
the following relaxations as regards computation
of solvency by the non-life insurers for their Health
insurance business:
Relaxed the requirement of Section 64(1)(ii)(b)
of the Insurance Act, 1938 for computation of
Reserve for Unexpired Risk or Health segment
for three years i.e., up to 2012-13. This relaxation
was initially introduced in 2008-09.
Relaxed the provisions of Regulation 2 (1)((a) of
IRDA (Assets, Liabilities and Solvency Margin
of Insurers) Regulations, 2000 as regards the
admissibility of assets in the specifi c context of
government receivables subject to a maximum
period of 180 days.
III.12.5 In order to bring uniformity in the manner of
calculation of Solvency Margin in respect of Motor TP
Pool, the Authority issued a clarifi cation that Gross
Premium in respect of Motor TP Pool will be defi ned
as “retrocession received from Motor TP Pool and
Gross Incurred claim will be taken as incurred claim
of Retroceded Business.”
Risk Based Solvency Approach
III.12.6 IRDA (Assets, Liabilities and Solvency Margin
of Insurers) Regulations provide for a factor based
solvency regime. The solvency regime in India does
not prescribe for identifi cation of the risks to which
an insurer is exposed and for setting aside capital for
the identifi ed risk(s). However, in case of life insurer,
the regulations provide for computation of Margin
for Adverse Deviation (MAD), which takes care of
all risks. Consequent upon introduction of Solvency
II by the European Union, it has become imperative
to fi nalize the road map for shifting to Risk Based
Solvency Approach in the Insurance Sector.
III.12.7 The Authority has constituted a Committee
for fi nalization of the road map for shifting to risk
based solvency approach for insurance sector. The
Committee is headed by Ex-Member (Actuary). The
terms of reference of the Committee provide for
studying the RBC approach followed in USA, Japan
and Singapore, Identifying the issues which may be
arising out of the RBC, Study of Solvency II and the
issues arising out of the same and recommending the
suitable approach in the Indian context.
III.13 Adjudication of disputes between Insurers
and Intermediaries or Insurance Intermediaries
III.13.1 As per Regulation 41(2) of IRDA (Insurance
Brokers) Regulations, 2002, any disputes arising
between an insurance broker and an insurer or any
other person either in the course of his engagement as
an insurance broker or otherwise may be referred to
the Authority by the person so affected; and on receipt
of the complaint or representation, the Authority
may examine the complaint and if found necessary
proceed to conduct an enquiry or an inspection or an
investigation in terms of these regulations. During the
year under review, the Authority has not received any
such requests for adjudication.
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