The Insurance Regulatory and Development Authority of India (Irdai) has turned down a request made by general insurance companies for a blanket relaxation of solvency margins due to Covid-19. However, it said specific cases would be considered on merit.
Last month, the General Insurance Council (GI Council), in a letter to the Irdai had sought relaxations in certain regulatory requirements, such as those related to solvency ratio.
The Council, which is the representative body of general insurance firms, had asked for relaxation in calculating available solvency margins (ASM) on account of delays in tenders related to government schemes and delays in receiving subsidy.
“The authority doesn’t see the need for general relaxation. However, any specific issues would be considered on merit,” Irdai said in its response.
The GI Council had also said that given the huge mark-to-market (MTM) losses in equity investments during March, Irdai should allow firms not to account for diminution in the value of equity investments while finalising accounts for the financial year ended March 31, 2020.
“Insurers are required to adhere to the applicable accounting standards framed by ICAI and the authority’s regulations/circulars on preparation of financial statements and valuation of investment,” the regulator said in its response.
While insurance firms ignore MTM gains, they are required to regard MTM losses as expenses.
“Though the outbreak was relatively delayed in India, the scare, the preventive shutdown, and the economic fall are unprecedented, with the impact on markets quite telling. Without exception, the non-life insurance sector is severely burdened and we fear difficulties in meeting regulatory requirements,” M N Sarma, general secretary of the GI Council, stated in the letter.
The GI Council had also requested that firms be allowed to consider MTM position as on February 29, 2020 as the basis of computing solvency.
“Alternatively, Irdai may relax the minimum solvency requirement of 1.5x for the time being,” the letter had said. Many firms may see their solvency ratio fall below 1.5 due to the crisis.
On the issue of giving additional time for the launch of Arogya Sanjeevani, up to June 1, Irdai has said, “All the general and health insurers have received UIN. In the present Covid-19 crisis, rolling out the standard health product expeditiously would be in public interest.”
Further, on the request to condone a break of up to 60 days for continuity of benefits in case of delay in renewal of health insurance, the regulator said, “Thirty days are already available for this, which is sufficient. Further, if the renewal date falls during the lockdown period, the authority has also allowed for continuation of policy without break.”