Govt begins process to migrate general insurance firms into Solvency II regime

The government has initiated a move to migrate the domestic general insurance companies into the Solvency II regime in a bid to strengthen the sector.
 
The move comes close on the heels of the RBI notification, announcing the banking sector's migration into Basel-III capital requirements. Solvency II prescribes the amount of capital that an insurer should hold to reduce the risk of insolvency.
 
Highly placed public sector insurance company officials told FC that the ministry of finance was keen to migrate PSU insurers to the Solvency II regime at the earliest possible date. The officials said at a meeting between top officials of public sector insurance companies, finance secretary (financial services) DK Mittal had asked insurers to begin work to migrate to the new regime of capitalisation. The first insurers that were being sounded out for migration to the Solvency II regime will include those with global operations, particularly European operations. They include the national reinsurer, General Insurance Corporation of India, and the largest general Insurer, New India Assurance.
 
Solvency II capital requirements were originally expected to become effective in November and insurers were expected to become compliant with the regime from January 2013 in Europe as mandated by European financial regulators. The regime, codified by the International Association of Insurance Supervisors, prepared the guidelines for the Solvency II regime in the aftermath of the global financial crisis in 2008 that saw the collapse of the world's largest insurer, American Insurance group.
 
However, the domestic regulator Insurance Regulatory and Development Authority (Irda) still has reservations on migration to solvency II. Irda's member (finance and investment) RK Nair said, "The finance ministry has sought our views. But we need to examine the requirements of the insurance sector."