The Insurance Regulatory and Development Authority has dismissed an observation made in a World Bank-International Monetary Fund study that the regulator was not adequately independent.
“IRDA would like to assert that there is complete autonomy with regard to supervision and regulation of insurance sector in general and insurance companies and intermediaries in particular,” IRDA chief T.S. Vijayan said in a statement.
The enforcement powers are being strengthened in the proposed Insurance Laws (Amendment) Bill, he added.
He expressed satisfaction on the present risk-mitigation system given the high-level of solvency at 150 per cent required to be maintained by insurers at all times.
However, with a view to facilitating a risk-based oversight, IRDA is looking at putting in place an early warning system (EWS) for the systemically important insurance groups, and is working closely with other regulators in the financial sector, Vijayan said. Similarly, there was dilution on the regulatory oversight of the Life Insurance Corporation as claimed by the report, he added. His statement came in response to a report by the global financial entities, which said the insurance regulator in India does not have modern risk-based EWSs in place to ensure the health of the insurance industry. In a detailed assessment report on core principles of the Indian insurance sector, the two financial entities have made many adverse comments. The ratios that were being measured (pertaining to solvency margins, etc.) appear to be largely generic rather than based on emerging experience, the report said, adding, “It is of a concern that IRDA does not have a direct role when insurers engage in capital management, such as buy-backs. This should be rectified…”
The enforcement actions and sanctions open to IRDA tend to be at the extremes — relatively light or very heavy. Incidentally, IRDA has recently stepped up its inspections and has been imposing a spate of penalties for violations. But, these financial sanctions available to the regulator in particular were outdated and needed to be more relevant to the modern scale of insurers and impact of inflation. Further, work needs to be done on the monitoring of operational and general risks in insurance, it said.
AUTONOMY
The report said IRDA is not completely independent as a supervisory authority in view of the current uncertainty regarding control of its funding and budget, its incomplete oversight of Life Insurance Corporation of India and the reserve powers of the central government “potentially detract from the supervisors’ powers and independence.” A maximum timeframe should be specified for the regulator to respond to various applications, it added.
The report is the first of its kind by independent assessors and is aimed at examining adherence to the Insurance Core Principles of the International Association of Insurance Supervisors.
naga.gunturi@thehindu.co.in