Since the appointment of Debasish Panda as Chairman of IRDAI in March 2022, many structural reforms have been introduced for the insurance sector in India. Some of the biggest reforms under Debasish Panda as chairman of IRDAI include shift to principal-based regulations from principle-based rules, shift to ‘use and file’ regime from ‘file and use’, Regulations on expense of management (EoM) and the latest one on providing higher surrender value to policyholders.

There are just as big insurance reforms waiting to happen. These include the composite insurance license, risk-based solvency and supervision, and the IFRS accounting method.

The composite insurance license will allow life insurers to produce health and other general insurance products such as motor insurance and vice versa. Although the implementation of the composite insurance license will only depend on parliamentary approval, when Panda was asked about his expectations, he said that the sooner the approval for the Insurance Amendment Act, which facilitates the composite insurance license, with that would be better.

Talking about the risk-based capital regime, Panda said the first Quantitative Impact Study (QIS) has already been conducted and the results have been discussed with insurance and reinsurance companies. Panda added that the risks in the first QIS will be carefully analyzed and adjusted, and then QIS 2 will be conducted in the next 3-4 months. Regarding the implementation of Risk Based Solvency, the IRDAI chairman said that a parallel filing of RBC could start by FY26 and a large-scale rollout by FY27.

According to IRDAI Chairman, Solvency/Risk-Based Capital is a more efficient way of capital utilization and allocation and will benefit all stakeholders. Risk-based capital (RBC) is a method of determining the amount of capital an insurance company needs to support its individual segment operations. Currently, insurers must maintain a solvency ratio of at least 1.5 times at the global business level, which means that an insurer’s assets at any given time must be 1.5 times greater than its liabilities.

On the International Financial Reporting Standards IFRS, the IRDAI Chairman said that work is in progress on the evaluation study. Panda said it expects a parallel period of IFRS implementation to begin from FY26 and full-scale implementation could take place from FY27.

According to Panda, IRDAI is targeting a FY26 timeline for implementing the risk-based supervisory framework. Under risk-based supervision, individual insurers will be assessed, monitored and supervised on the basis of the individual risks they carry on their books, relative to the current regime of all insurers being assessed to the same extent despite the different risks they carry bear in their books.