The Insurance Regulatory and Development Authority of India (IRDAI) has said that General Insurance Corporation of India (GIC Re), alongside Life Insurance Corporation of India (LIC) and New India Assurance Co. Ltd., continue to be identified as Domestic Systemically Important Insurers (D-SIIs).
D-SIIs are re/insurers that are believed to be “too big or too important to fail”.
The IRDAI says that D-SIIs refer to carriers of such size, market importance and domestic and global interconnectedness, whose distress or failure would result in a significant dislocation in the domestic financial system.
Owing to this, the continued functioning of these insurers is seen as vital for the uninterrupted availability of insurance services to the national economy.
For the year 2021-2022, the IRDAI has confirmed that state-owned enterprises GIC Re, LIC, and New India will continue to be identified as D-SIIs, as they were in the 2020-2021 year.
As a result of being identified as a D-SII, the perception and the perceived expectation of government support may amplify risk taking, lower market discipline, create competitive distortions, and increase the possibility of distress in future.
The IRDAI say that these considerations require that D-SIIs should be subjected to additional regulatory measures to deal with the systemic risks and moral hazard issues.
Given the nature of their operations and the systemic importance of the D-SIIs, these re/insurers have to carry forward their efforts to both raise the level of corporate governance and identify all relevant risks and promote a sound risk management framework and culture.