The insurance regulator IRDAI has identified three large state owned insurers- Life Insurance Corporation of India,( LIC), General Insurance Corporation of India and The New India Assurance as Domestic Systemically Important Insurers (D-SIIs) which need enhanced regulatory supervision..
“D-SIIs are perceived as insurers that are ‘too big or too important to fail’ (TBTF) and we have asked these three institutions to raise the level of corporate governance and identify all relevant risk and promote a sound risk management culture,'' said the IRDAI on Friday. .
This perception and the perceived expectation of government support may amplify risk taking, reduce market discipline, create competitive distortions, and increase the possibility of distress in future.These considerations require that these D-SIIs should be subjected to additional regulatory measures to deal with the systemic risks and moral hazard issues, said the IRDAI.
In order to identify such insurers and to put such insurers to enhanced monitoring mechanism, the IRDAI has developed a methodology for identification and supervision of D-SIIs.
The parameters, as per the methodology for identification of D-SIIs, inter alia include the following:
-the size of operations in terms of total revenue, including premium underwritten and the value of assets under management;
-global activities across more than one jurisdiction;
-lack of substitutability of their products and/or operations; and
-interconnectedness through counterparty exposure and macro-economic exposure.