Key Facts

Key regulatory aspects of IRDAI's decision:

• Two Working Groups: One group dedicated to Life Insurance headed by Jamuna Choudhary and the second for General Insurance headed by Parmeshwar Shelke.
• Mandate: The committees will submit final recommendations and an exposure draft within one month to align solvency computation with Ind AS 117 (Insurance Contracts).
• Risk Sensitivity: Moving from the current Solvency Margin regime (prescribed at 150%) to RBC ensures that capital requirements dynamically mirror asset-liability mismatch, credit defaults, catastrophe risks, and operational vulnerabilities.
• Mission 'Insurance for All by 2047': The transition seeks to optimize capital efficiency and attract global institutional investment into Indian insurance.

GK Context

• Under the existing Insurance Act 1938 framework, Indian insurance companies maintain a minimum Solvency Ratio of 1.5 (150%).
• The Risk-Based Capital regime is modeled on global best practices such as Solvency II in the European Union and the International Association of Insurance Supervisors (IAIS) Insurance Capital Standard (ICS).

Static GK

• The Insurance Regulatory and Development Authority of India (IRDAI) is a statutory regulatory body established under the IRDA Act, 1999, based on the recommendations of the R.N.
• Malhotra Committee (1994).
• Headquartered in Hyderabad, Telangana, it regulates and promotes both life and general insurance industries across India.

UPSC Mains Framework

GS Paper III (Indian Economy & Regulatory Frameworks / Financial Sector): How does the transition from factor-based solvency to a Risk-Based Capital (RBC) framework safeguard policyholders while unlocking investment capital in India's insurance sector?