Hyderabad:
With S&P BSE Sensex losing more than 10,000 points in the month of March, due to the severe global impact of the caronavirs pandemic,the General insurance Council (GI Council),the official body of the domestic general insurance industry, has written to the insurance regulator IRDA to provide regulatory leeway for protecting the required solvency ratio of the companies.
With huge mark-to-market loss in equity investments of the general insurers, the GI Council has apprehended that many companies will have their solvency ratio fall below 1.5, the mandatory requirement to do business, if the existing accounting norms are complied with.
The domestic general insurance companies will be impacted by mark-to-market (MTM) losses on its equity investment portfolio while finalizing their annual balancesheet for the year ending March 31, and consequently, it may impact their solvency parameters .
Going by the existing regulations, the general insurers required to recognise mark-to-market losses as an expense in their profit and loss accounts.
“ Without exception, the non-life insurance sector is severely burdened and we are afraid we will have difficulty in meeting certain regulatory requirement,” said M N Sarma, general secretary, GI Council in its letter to the IRDAI adding that the IRDAI may relax the minimum solvency requirement of 1.5 times for the time being on the same lines as the regulator had relaxed at the time of dismantling motor third party pool.
Alternatively, companies might be allowed to consider mark-to market position as on February 29, 2020 as the basis of computing solvency, said GI Council.