Latest News | Irdai Working Towards Risk-based Capital, Supervision Frameworks: Chairman Panda

New Delhi, Jun 22 (PTI) Irdai chairman Debasish Panda on Wednesday said that the regulator is working on a proposal to move towards a risk-based capital framework to ensure optimum utilisation of capital, in line with the practice adopted by other countries.

The Insurance Regulatory and Development Authority of India (Irdai) is also working towards revamping the supervision framework that will be based on risk enabled by technology, he said.

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"We are trying to move away from the solvency or the factor-based method to take care of the risk to towards a risk-based capital framework," Panda said during a talk series on 'Know Your Regulator' hosted by The State Capacity Initiative at the Centre for Policy Research (CPR), the Forum of Indian Regulators (FOIR) and the Indian Institute of Corporate Affairs (IICA).

Giving an example to explain the present capital framework, he said for a risk carrying of Rs 100 you are being asked to make a provision of 100 (rupees) and for risk of Rs 150 you are also asked for a provision of (Rs) 100 and for (Rs) 50 also you are asking for (Rs) 100.

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"So, that is not a very optimum way of utilisation of the capital. Today there are countries and regulators where there is a risk-based capital regime already in place. So, we have also started this process. We now have a dedicated vertical working on a mission mode to move towards the risk-based capital regime and we have also got the industry on board so that we work in tandem and also build the technological platform," Panda said.

Also, he said that the regulator is also trying to move away from the traditional supervision-based framework to a risk-based supervision framework which will be enabled by technology.

"Currently, we have traditional method of supervision and we have very recently started embarking on a project of moving towards a risk based supervision which will be enabled by technology. In another word, you can call it 'Suptech' --supervision technology. Today supervision tools are available, so we have already started working on it," said the Irdai chairman.

He said within the Irdai, it has created a vertical which is working on a mission mode to ready this.

"We are also engaging the industry so that we move hand in hand and be ready with this supervision regulatory framework which we call the risk-based supervisory framework. So, these two major programmes are already launched by us within the Irdai in consultation with industry and other stakeholders.

"And I hope the risk-based supervisory framework, we should be able to do this within 6-9 months. And the risk-based capital regime will take maybe around 2-3 years. And that is the estimate that the international experts also (express)...but we are fast-tracking that as well," Panda added.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)