IRDA has sought to defend itself against the observations made in the Detailed Assessment Report (DAR), prepared by World Bank and IMF, which said that the insurance regulator has neglected in supervising the state owned LIC. Through a press release, IRDA Chairman, TS Vijayan has asserted that the insurance regulator has complete supervision on LIC with regard to market conduct and prudential regulations.
DAR had also observed that the IRDA lacks in performing some duties like monetary sanctions, providing reserves under the Indian Motor Third Party Pool of commercial vehicles, de jure independence etc.
On monetary sanctions, IRDA has said that the enforcement powers are being strengthened in the proposed Insurance Laws (Amendment) Bill which would help in carrying out monetary sanctions. Clearing its stance on Indian Motor Third Party Pool of commercial vehicles, IRDA has clarified that it had been dismantled in 2012.
Besides, the assessment report recommended IRDA to put in place a modern risk based early warning system. However, given the high level of solvency at 150 percent required to be maintained by all Indian insurers at all times, IRDA does not envisage the need for a ladder approach to the intervention levels. Instead, the insurance regulator said that it is already focusing on risk based capital approach in order to maintain a high level of solvency. “As a first step an exposure draft has been released laying down the framework to assign risk weights to financial assets supporting insurance liabilities,” said IRDA.
Also, IRDA claims that it has laid down the regulatory framework on detection classification, monitoring, reporting and mitigation so as to prevent fraud.
The report had also commended IRDA for carrying out effective work on consumer protection, market oversight, maintaining transparency and granting licenses. The report had mentioned that IRDA’s ongoing supervision of insurance companies and market is tight and displayed a strong-level of control and that the insurance industry in India has relatively large footprint. “India is a clear outperformer in terms of expected life insurance penetration, and is broadly in line with the expectations in the non-life section,” added the report.