The solvency debate

Insurance companies need
04 February 2004

Venkatachari Jagannathan
04 February 2004

Chennai: Three years after the entry of private insurers (life and non life), the issue of solvency margin to be maintained by insurers is now coming to the fore.

It may be recalled that the Life Insurance Corporation of India (LIC) got into a spot on the solvency margin issue. (See )

According to some industry experts even global life insurers would not be able to satisfy the norms stipulated for Indian life insurers.

Simply put, solvency margin is the excess of assets over liabilities that an insurance company has to maintain as a safety margin.

The Insurance Regulatory and Development Authority (IRDA) has laid down the regulations on the issue. While the non life insurers can just follow the regulations, the IRDA through an administrative fiat has asked the life insurers to maintain 150 per cent solvency margin-50 per cent extra cushion over and above the norms stipulated in the regulations.