Chennai: It is just not the Life Insurance Corporation of India (LIC) that is finding it difficult to meet the stipulated solvency norms. For a brief period the life insurance giant had company in the form of Max New York Life Insurance Company Limited.

According to the 2003-04 annual report of the Insurance Regulatory and Development Authority (IRDA), published sometime back, Max New York Life failed to meet the stipulated 150 per cent solvency norms by a small margin.

Says IRDA chairman C S Rao, "The company had revised its solvency margin calculations subsequently and these have been reviewed by us and have been found satisfactory."

According to him, Max New York Life satisfied IRDA's solvency norm stipulations at the end of 2003-04.

In response to the questions sent to Max New York Life's chairman and vice chairman, the company's public relations agency says the solvency margin at the end of FY 2004 was 152 per cent. The Rs466-crore equity-based company had a solvency margin of over 200 per cent as on June 2005.

According to Rao, when a company does not meet the stipulated margin levels, it is required to take steps to comply with the regulatory stipulation. "Compliance of the requirement is ensured through infusion of fresh equity. In case of the insurer being unable to do so immediately, a time frame is prescribed to ensure compliance."

The IRDA report also states that the solvency margins of private life insurers were declining at the end of 2003-04 as compared to the previous years. When asked about the trend at the end of fiscal 2004-05, Rao replies, "The insurers are required to file the actuarial reports for the financial year within six months of the close of the year. The filings of the insurers for the year 2004-05 are awaited."

According to him, the solvency requirements are linked to the insurers' sum at risk. Given that during the initial years the sum at risk is low and the fact that the entry level paid up capital requirement is Rs100 crore, the solvency margin of the insurers in the initial years is on the higher side.

"However, over the years as their operations stabilise insurers inject fresh capital to meet the requirements of their business and to meet the solvency requirements as stipulated by the IRDA," he remarks.