In a move that can augur well for crop insurance, the Insurance Regulatory and Development Authority of India (IRDAI) has reduced the solvency margin requirement for insurers doing crop business. This will unlock ₹1,400 crore of funds for insurers to underwrite business.
Since FY18, IRDAI has been relaxing the period of admissibility of premium due from the government for solvency calculation purposes, from 180 days to 365 days. “Now, it has been decided to extend the above relaxations from FY23 onwards till further orders,” the insurance regulator said in a release on Tuesday.
The move would improve the solvency status of the general insurance industry as a whole. It is expected that the effect of this relaxation will be positive on the industry as it will free up the capital, which can be utilised for underwriting more business.
“It is estimated that approximately ₹1,400 crore will be unlocked and general insurers may use this opportunity to optimise this freed up capital in a way which leads to increased insurance penetration in India,” the regulator said.
Ease of doing business
IRDAI has been working towards promoting the ease of doing business for insurance companies, and has reviewed and rationalised the regulatory returns to be filed by them. Last week, the IRDAI reduced the number of offline returns being submitted by life insurers from 40 to only 4, whereas the number of online returns would come down from 8 to 5.
Three separate certification requirements have also been consolidated into one. This comes after similar relaxations were extended to general insurers and health insurers vide circulars dated May 12 and May 23, respectively.
It had also discontinued submission of hard copies of any reports, returns or other documents related to actuarial valuation. “It is expected that reduced compliance burden will enable insurers to better focus their efforts and time in reaching out to every Indian with the ultimate goal of improving coverage and penetration,” the regulator said in the release.