India: Govt insurers face capital pressure under RBC framework
Source: Asia Insurance Review | Sep 2019
State-owned insurers are expected to require more capital once the insurance sector moves to a risk-based solvency regime that could commence in April 2021.
“Several public sector insurers are engaged in riskier businesses in areas like group health and marine hull that have high claims risks,” said an official. Hence, it is likely that they will have to hold more capital, reported Moneycontrol.
Public sector insurers include New India Assurance, United India, Oriental Insurance, National Insurance and Agriculture Insurance Company.
At present, insurers’ assets are required to be 1.5 times, or 150%, of their liabilities. Once the risk-based capital framework is implemented, insurance companies will have to hold capital in proportion to the risk of the business they write. The riskier the business, the higher is the capital requirement. Insurers which do not wish to maintain large reserves will have to revamp their portfolio towards less risky business. A