IRDAI has identified LIC of India, GIC Re of India and New India Assurance as domestic systemically important insurers (D-SIIs) for the year 2020-21. The regulator said that from now on, it would disclose the list of important insurers on an annual basis.
Currently, LIC India, GIC Re and New India Assurance are among India’s largest insurers in terms of market share.
According to IRDAI, 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. Therefore, the continued functioning of D-SIIs is critical for the uninterrupted availability of insurance services to the national economy, said IRDAI.
The insurance regulator said that these insurers are too big to fail. “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 D-SIIs should be subjected to additional regulatory measures to deal with the systemic risks and moral hazard issues,” said IRDAI.
IRDAI has asked these insurers to raise the level of corporate governance, identify all relevant risks and promote a sound risk management culture in India.
Further, IRDAI said that these three insurers will be subjected to enhanced regulatory supervision.