The IRDAI’s board in its recent meeting had deliberated the issue and approved drafting and publishing the draft regulations on the proposed Indian Risk Based Capital Framework for stakeholder consultation.The issues which need to be addressed before launching RBC in the Indian insurance market were discuused by the IRDAI board.
Hyderabad:After implementing the Indian Accounting Standards (Ind AS) since Apr 1, the Indian insurance regulator IRDAI has now moved swiftly to unveil Risk Based Capital (RBC) Framework for the industry.
The regulator’s board in its recent meeting had deliberated the issue and approved drafting and publishing the draft regulations on the proposed Indian Risk Based Capital Framework for stakeholder consultation.
The board had discussed steps taken towards implementation of the RBC framework in India, through a consultative approach after examining risk based solvency frameworks in other jurisdictions.
According to the IRDAI, the current capital requirements in the industry are not fully risk-based and do not fully meet ICP standards on Capital Adequacy.
Unlike the current solvency-based system which determines the capital requirement of any Indian re/insurer, RBC considers factors such as underwriting risk, market volatility, credit exposure and operational risks while determining capital adequacy.
The proposed framework is expected to improve financial resilience, strengthen policyholder protection and bring Indian insurance regulations closer to global standards such as Solvency II.
For re/insurers, the introduction of thr RBC norms could lead to more efficient capital allocation and sharper risk management practices.
However, the transition may require significant investments in data systems, actuarial capabilities and governance frameworks.
The IRDAI has been gradually preparing the sector for the eventual rollout of the RBC regime.
The Financial Sector Assessment Program (FSAP) conducted by IMF and World Bank in 2024 has also recommended moving towards a risk based solvency assessment.
The IRDAI had carried out the initial Quantitative Impact Study (QIS1) in 2023 and based on the feedback and analysis of the submissions, the framework has been revised and the second Quantitative Impact Study (QIS2) was carried out in August 2025.
The results of initial analysis of the QIS 2 and issues which need to be addressed before launching RBC in the Indian insurance market were discuused by the IRDAI board.
Under new Ind AS, which fully converges Indian insurance industry with the global IFRS 17 standard for insurance contracts,the regulations provide for parallel reporting for a period of two years, comprising financial statements prepared in accordance with Ind AS alongside financial information under the existing accounting framework.
This approach is intended to enable insurers to stabilise processes and controls, while allowing stakeholders to understand and assess the impact of the new accounting framework.
To facilitate smooth transition, for insurers facing challenges in immediately shifting to Ind AS, a provision has been made to grant forbearance for one-year. During this period, such insurers shall continue to submit Ind AS based financial information also to the IRDAI.