The Life Insurance Corporation (LIC), GIC Re. and New India Assurance continue to be identified as Domestic Systemically Important Insurers (D-SIIs), the insurance regulator said.
D-SIIs are being subjected to enhanced regulatory supervision, the.Insurance Regulatory and Development Authority of India (IRDAI) said in a statement on Friday.
Domestic Systemically Important Insurers (D-SIIs) refer to insurers of such size, market importance, and domestic and global interconnectedness, whose distress or failure would cause a significant dislocation in the domestic financial system.
“Therefore, the continued functioning of D-SIIs is critical for the uninterrupted availability of insurance services to the national economy,” the regulator said.
‘Too important to fail’
D-SIIs are perceived as insurers that are ‘too big or too important to fail’ (TBTF).
This perception and perceived expectation of government support may amplify risk-taking, reduce market discipline, create competitive distortions, and increase the possibility of distress in the future.
These considerations require that D-SIIs be subjected to additional regulatory measures to deal with systemic risks and moral hazard issues.
Given the nature of their operations and the systemic importance of the D-SIIs, these insurers have to carry forward their efforts to raise the level of Corporate governance and identify all relevant risks and promote a sound risk management framework and culture,. IRDAI said.