IRDAI relaxes solvency margin requirement for crop insurance, reduces compliance burden

The Insurance Regulatory and Development Authority of India (IRDAI), on Tuesday, in its series of reforms, announced that it will reduce the solvency margin requirement for general insurers doing crop business, thereby freeing up capital worth Rs 1,400 crore.

According to a statement from the insurance regulator, IRDAI’s this move is expected to increase the capacity of General Insurers to underwrite more business.

IRDAI, in a statement, said, “it is expected that the effect of this relaxation will be positive on the industry as it will free up the capital, which can be utilised for underwriting more business. It is estimated that approximately Rs 1,400 crore will be unlocked and general insurers may use this opportunity to optimise this freed-up capital in a way which leads to increased insurance penetration in India.”

Since FY18, IRDAI has been relaxing the period of admissibility of premium due from the states for solvency calculation from 180 days to 365 days. However, from now the insurance regulator has decided to extend this relaxation from FY23 onwards till further orders.

“This move will improve the solvency status of the general insurance industry as a whole,” the regulator said.

The insurance regulator also added that the premium receivables related to state/central government-sponsored schemes for FY23’s all quarters and onward to the extent that they are not realised within 365 days will be placed with a value of zero.

In addition to this, the insurance regulator in its continuous endeavour to promote ease of doing business for insurance companies in the country, has also reviewed and rationalised the regulatory returns to be filed by the Insurance Companies.

IRDAI, in its latest circular, reduced off-line returns being submitted by Life Insurers from 40 to only 4, whereas the online returns have been dropped from 8 to 5. Moreover, It has also consolidated three separate certification requirements into one.

The regulator’s this move comes after it has extended similar relaxations to the general insurers and health insurers respectively. IRDAI had also discontinued the submission of hard copies of any reports, returns or other documents related to actuarial valuation or reinsurance.

IRDAI expects that a reduced compliance burden would enable insurers to better focus their efforts and time on reaching out to every Indian to improve coverage and penetration.