The Insurance Regulatory and Development Authority of India (IRDAI) has developed a methodology for the identification and supervision of Domestic Systemically Important Insurers (D-SIIs).
This has been done through measuring the size of operations in terms of total revenue, including premium underwriting and the value of assets under management.
D-SIIs refer to insurers of a bigger size and are often perceived as insurers that are ‘too big or too important to fail’. This type of insurer has a 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.
Due to having support from the government, the insurers may amplify risk taking, reduce market discipline, create competitive distortions, and increase the possibility of distress in future. Because of this, D-SIIs should be subjected to additional regulatory measures to deal with the systemic risks and moral hazard issues.
The IRDAI also monitor insurers global activities across more than one jurisdiction.
These regulations have been put in place in order to cover various aspects of their operations. IRDAI identifies D-SIIs on an annual basis and publicly discloses the names of these insurers.
After analysis of data, IRDAI has identified these insurers as D-SIIs for the year 2020-21, Life Insurance Corporation of India, General Insurance Corporation of India and The New India Assurance Co. Ltd.
Given the nature of their operations and the systemic importance of the D-SIIs, these insurers have been asked to Raise the level of corporate governance whilst identifying all relevant risks and promote a sound risk management culture. D-SIIs are also subjected to enhanced regulatory supervision.
