‘Domestic Systemically Important Insurers (D-SIIs)’

  • Category
    Economy
  • Published
    8th Oct, 2020

Context

The Life Insurance Corporation of India (LIC), General Insurance Corporation of India (GIC) and The New India Assurance Co have been identified as Domestic Systemically Important Insurers (D-SIIs) for 2020-21 by insurance regulator IRDAI.

About

What are D-SIIs?

  • D-SIIs refer to insurers of such size, market importance and domestic and global inter-connectedness whose distress or failure would cause a significant dislocation in the domestic financial system.
  • D-SIIs are perceived as insurers that are ‘too big or too important to fail’. This perception and the perceived expectation of government support will amplify risk taking, reduce market discipline, create competitive distortions, and increase the possibility of distress in the future.

Methodology for identification & supervision of D-SIIs

  • In order to identify too-big-to-fail insurers and to put such insurers to enhanced monitoring mechanism, IRDAI has developed a methodology for identification and supervision of D-SIIs.
  • The parameters include-
    • 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
  • The continued functioning of D-SIIs is critical for the uninterrupted availability of insurance services to the national economy.

The new D-SIIs

  • Largest insurer: LIC is the largest insurer in the country with a balance sheet of Rs 31.2 lakh crore.
  • Sole reinsurer: GIC Re is the country's sole reinsurer.
  • Largest general insurance company: New India is the country's largest general insurance company.

GIC Re and New India are listed insurers while LIC is in the process of listing on the stock exchanges through a disinvestment by the government. All three entities are owned by the government.

About IRDAI

  • Insurance Regulatory and Development Authority (IRDA) has been set up as autonomous body under the IRDA Act, 1999.
  • IRDAI regulates the Indian insurance industry to protect the interests of the policyholders and work for the orderly growth of the industry.
  • IRDAI’s Mission: To protect the interests of policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto.

What will they do as ‘D-SIIs’?

  • Raise the level of corporate governance: As D-SIIs, the three insurers LIC, GIC Re and New India have been asked to raise the level of corporate governance.
  • Identify risk & promote management culture: These insurers also have to identify all relevant risk and promote a sound risk management culture.
  • Enhance regulatory supervision: These D-SIIs will also be subjected to enhanced regulatory supervision during this period.
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