The Hindu Business Line : Cut in solvency margin helps life insurers

NEW DELHI: Coming as a New Year gift after a Bill on hiking the FDI cap in insurance companies, life insurers got another booster from regulator IRDA in the form of a cut in the solvency margin for ULIP schemes, which would release additional capital for firms.

The Insurance Regulatory and Development Authority (IRDA) has cut solvency margins for various ULIP schemes by around 1.2 per cent on average so that the firms can use their resources in a judicious way and insure vast sections of society.

Solvency margin refers to the capital that an insurance company is required to keep aside for policyholders to meet unforeseen exigencies.

“There is a need to utilise the capital optimally with affordable cost so that insurance penetration increases,'' the IRDA said in a circular.

The move of the regulator aims at freeing up the capital of insurers so that they can provide products at more affordable costs.

“The decision is a welcome move for the life insurance industry. The new norm will free up capital, which could be utilised towards distributing, expansion, infrastructure and product innovation,” Max New York Life CFO and Senior Director, Mr Sunil Kakar said.

He said the decision will also help in improving the reach and ownership of life insurance in the country. - PTI

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