INSURANCE regulator IRDAI on Tuesday announced setting up two expert panels to prepare a risk-based capital framework aligned with Indian Accounting Standards. IRDAI is in the process of transitioning the Indian insurance sector from the existing factor-based solvency regime to a risk-based capital (RBC) framework, under which the capital requirement of an insurer is to be commensurate with the risks it carries, measured on an economic (market-consistent) balance sheet. One of the objectives of the working groups is to achieve a coherent convergence of the RBC framework with Indian Accounting Standards (IndAS), using the IndAS financial statements as the basis for RBC, so that a single set of underlying data, models and assumptions, of valuation framework, serves both purposes to the maximum extent.

 

“The resulting RBC framework shall be transparent, comparable across insurers, resistant to arbitrage, proportionate, and implementable within a realistic transition path,” the Insurance Regulatory and Development Authority of India (IRDAI) said in a release. They will also prepare an exposure draft of the risk-based capital(RBC) regulations, it further added. The two panels will also prepare an approach paper setting out recommendations covering all possible scenarios, alternative approaches and their consequences. The two groups have been asked to complete their work and submit all deliverables within a month. Jamuna Choudhary and Parmeshwar Shelke are the member conveners of the life and non-life working groups, respectively.