IRDAI lists LIC, GIC, New India as systemically important

September 26, 2020 12:00 am | Updated 03:31 am IST - HYDERABAD

As domestic SIIs, companies will be subject to enhanced regulatory supervision

Size matters:Premium underwritten and asset size are among parameters on which the SIIs are identified.File Photo

Size matters:Premium underwritten and asset size are among parameters on which the SIIs are identified.File Photo

The Insurance Regulatory and Development Authority of India (IRDAI) has identified the Life Insurance Corporation of India (LIC), General Insurance Corporation of India (GIC) and The New India Assurance Co. as Domestic Systemically Important Insurers (D-SIIs) for 2020-21.

Given the nature of operations and their systemic importance, the regulator has asked the three public sector insurers to raise the level of corporate governance, identify all relevant risks and promote a sound risk management culture. As D-SIIs, they will also be subjected to enhanced regulatory supervision, IRDAI said in a statement.

Too big to fail

D-SIIs refer to insurers of such size, market importance and domestic and global interconnectedness whose distress or failure would cause a significant dislocation in the domestic financial system. Their continued functioning is critical for the uninterrupted availability of insurance services to the national economy.

D-SIIs are perceived as insurers that are too big or too important to fail. Such a perception and the expectation of government support may amplify risk taking, reduce market discipline, create competitive distortions and increase the possibility of distress in future. Thus, D-SIIs should be subjected to additional regulatory measures to deal with the systemic risks and moral hazard issues, IRDAI said.

Size in terms of total revenue, including premium underwritten and the value of assets under management are among the parameters on which the insurers are identified. IRDAI said it will list D-SIIs on an annual basis.

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