New India Assurance is ready to embrace Solvency II norms, the insurance equivalent for Basel III norms in the banking sector. It is a risk-based system where capital requirements are aligned with the underlying risks of the insurance company.
The aim is to deliver a true risk-based economic framework for insurance supervision that enhances protection of the policyholder.
G. Srinivasan, Chairman and Managing Director, New India Assurance, told
The current solvency norms stipulate that the value of assets should exceed the value of liabilities by a certain margin (150 per cent). This is too simplistic a definition for solvency.
But over a period of time, the Indian insurance sector will have to move towards the Solvency II norm.
“Clearly, it is the way going forward, and New India Assurance is prepared,” Srinivasan said.
The new norm has not come into effect in the European Union; London has reportedly put 2016 as the deadline year for itself.
INDUSTRY STATUS
When asked about the state of preparedness of the domestic industry, he said it’s time they gave it some thought. Not everyone, however, may be ready given associated higher capital requirements.
“There are 28 players in the field, and Solvency II is likely to prove challenging for some. It is a call that individual companies need to take,” Srinivasan said.
Responding to a separate question, he said, New India Assurance has been able to hold up itself well in the maelstrom ruling the financial market in recent times.
As for the impact on investment income, he said, it was mixed. Debt and fixed deposits have started improving while profit on sale of equity has been very volatile.
“It’s a temporary phase and we are confident we will ride it out without much of a problem,” Srinivasan said.