The Insurance Regulatory and Development Authority of India (Irdai) is making significant efforts towards developing and implementing a risk-based capital (RBC) framework for insurers, with plans to roll it out by 2025, Irdai chairman Debasish Panda said here on Wednesday.
The proposed RBC framework, which aligns with international capital standards, will mark a shift from the current factor-based solvency capital regime, allowing insurers to manage their capital more efficiently. “We are about midway through the development and aim to roll out the RBC by 2025,” Panda added.
Delivering the inaugural address at the FE Insurance Summit 2024, themed ‘The Future Readiness Dialogue,’ Panda also mentioned that the regulator is collaborating with insurance companies to implement the International Financial Reporting Standards (IFRS) by 2025, ensuring full operational readiness by 2027.
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“We are in continuous dialogue with insurers to facilitate a smooth transition,” he added.
Panda also noted that Irdai is transitioning to a risk-based supervisory framework (RBSF), which will aggregate macro-economic, operational, liquidity, and management risks, providing the regulator with early warning signals at the enterprise level. “So, the RBC, IFRS, and RBSF combined will strengthen our ability to ensure financial stability at all times,” he said.
The Irdai chairman highlighted that the insurance sector manages assets worth Rs 70 lakh crore, and the investment framework has been revamped to allow insurers to explore new avenues for higher returns. Insurers are permitted to invest in funds of funds of AIFs, debt securities of InvITs, and REITs, with increased exposure to the BFSI sector.
On the highly anticipated Bima Trinity initiative, Panda shared that the first phase of implementation is in its “advanced stage.” The Bima Trinity comprises Bima Sugam (an insurance e-marketplace), Bima Vistaar (a comprehensive, affordable insurance product), and Bima Vaahak (a women-centric distribution channel). A company has been registered to operate Bima Sugam, and with the recent appointment of a new CEO, the leadership team will soon be in place. “The onboarding process for a tech service provider is also underway,” he said.
Panda further noted that guidelines for Bima Vaahak have been issued, and the final product structure for Bima Vistaar is now ready. “Once fully operational, the Bima Trinity will be a gamechanger for the insurance industry.”
Highlighting Irdai’s efforts to enhance ease of doing business, Panda said the regulator has modernised its principle-based framework, reducing the number of regulations from 78 to just 20, while repealing over 375 circulars.
He also pointed out that new insurance applications can now receive a no-objection certificate within 24-48 hours via the online portal, with dedicated facilitators guiding them until operations commence.
“Once in the market, insurers can launch products immediately under the ‘use and file’ regime,” he said. Additionally, the prior approval requirement for expense management and capital raising has been removed, leaving these decisions to the boards of insurance companies.
