Use our Portfolio Manager
 to generate:

    - Insurance Chart
    - Cash Flow Chart
    - Premium Calendar

  Insurance Counsellor
  Calculators
   Log in

   Need for Insurance
  Insurance & Tax
  Retirement Planning
  Insurance as Investment

Home / IRDA Update 

Stringent norms framed for new players by IRDA

In a bid to ensure stringent control over the liberalised insurance sector, the Insurance Regulatory & Development Authority (IRDA) has opted for a stringent disclosure norms for aspiring new players.

Apart from the asking for a five-year balance sheet of a company which wants to enter the insurance business, the authority has asked the players to provide information about the source of meeting the initial Rs.100 crores mandatory capital as well as the future capital needs.

Also in a bid to prohibit dubious companies from entering the sector, the IRDA has asked aspiring players for any past record of regulatory intervention and restrictive direction from any authority. IRDA has directed the companies to furnish description of a business model used for financial projections based on assumptions for 10 years for each year from the start.

The description should include 10-year projections in terms of expected premium income, break-even periods and return on capital, investment income, profit and loss accounts and balance sheets, first year and renewal expenses ratios, shareholder dividends including both Indian and foreign partners, policy holder surpluses and bonus declarations, expenses of administration, required solvency margins and statutory reserves.

IRDA has further stipulated that in arriving at the premium rates, the appointed actuary will need to build the estimated expense levels into the premium calculations. The new players should also give the details to the authority about the way in which expenses of administration have been estimated and converted into average factors. These expenses will have to be distinguished between the first year and renewal, fixed and variable and all overhead expenses will also have to be covered.

The companies have report to the authority about their exact plan to undertake rural or social sector business and how they plan to discharge obligations in respect of unorganised sector to cover risk of economically weaker sections of the society and backward classes.

About the reinsurance business, IRDA has said that the nature of the reinsurance arrangement should be described fully giving details of two reinsurers, basis of reinsurance and reinsurance commission and the manner in which the retentions have been established should also be discussed with the authority.

Defining the role of information technology in the industry, IRDA has asked the new players to provide information on the different areas where computer system will be employed, whether the system will be bought off the shelf (with some customisation), developed locally or imported to India by the foreign partner, the degree to which the systems will be used for policy holder servicing. The new players have also to intimate the IRDA on key aspects of the promoters respective shareholdings, roles and responsibilities, directorship and inter-relationship.

Details of shareholders holding in excess of 2 per cent of the paid-up capital have to be informed to the authority.

More Updates

| Back | Top | Home |