IRDAI sets up SII committee

The Insurance Regulatory Development Authority of India recently set up a committee to identify a Domestic Systematically Important Insurer (D-SII) and institute an enhanced regulatory framework for such organisations. The Life Insurance Corporation (SII) will most likely fall in this category.

However, insurance sector officials are not sure whether any other life insurer or a general insurance player other than GIC Re will qualify for the status. The committee has been asked to submit report in six months.

“Given the dominant position of LIC in India, while any other insurer qualifies to be a D-SII or not, that LIC is a sure candidate does not require much explanation,” said K.K Srinivasan, former member (non-life) of IRDAI. Explaining the rationale for having enhanced regulatory watch for SIIs, IRDAI had said the failure of an SII has potential to cause significant disruption to the essential services they provide to policy holders and to the overall economic activity in the country.

SIIs are perceived as insurers that are ‘too big to fail’. “The continued functioning of SIIs is critical for the uninterrupted availability of uninterrupted insurance services to the real economy,” the regulator said recently.

“Given the very nature of its constitution as a corporation formed under a specific Act of the Parliament (LIC Act), LIC does enjoy some unparalleled privileges and protections. But it is often forgotten that while the Government has provided the privileges, protections and guarantees, the funds of LIC come from millions of ordinary policy holders,” Srinivasan said.