IRDA, the Insurance Regulatory Development Authority has asked insurers to initiate the process of calculating ‘economic capital’ from March 2010. This step is a move to catalyze the lower capital requirement for life insurers,
Economic capital is calculated by determining the amount of capital that insurers need to ensure. This is a step towards risk-based capital. IRDA will review it at the end of October.
Though at the moment, most of the insurers are doing the theoretical calculation. But according to the current norms, insurers have to give the actuarial calculation of solvency.
The calculation is variable and depending on the composition of the product. If a product has guaranteed return, the capital requirement would be higher, whereas for products where there was no guarantee, the capital requirement would be lower.
“If you look to the present product composition, every insurance company will have to keep aside capital based on the solvency margin,” said Niraj Jain, the Chief Principal Officer, InsuranceMall.
Right now, the insurance companies are following a formula-based method of calculating capital which includes solvency margin (varies with different products.) It is higher for the products which have higher guarantees but it’s lower for ULIPs.
Now, if you want to understand the nuances of different types of policies and its price, feel free to seek the help of InsuranceMall to select the right products based on your need.
Economic capital is calculated by determining the amount of capital that insurers need to ensure. This is a step towards risk-based capital. IRDA will review it at the end of October.
Though at the moment, most of the insurers are doing the theoretical calculation. But according to the current norms, insurers have to give the actuarial calculation of solvency.
The calculation is variable and depending on the composition of the product. If a product has guaranteed return, the capital requirement would be higher, whereas for products where there was no guarantee, the capital requirement would be lower.
“If you look to the present product composition, every insurance company will have to keep aside capital based on the solvency margin,” said Niraj Jain, the Chief Principal Officer, InsuranceMall.
Right now, the insurance companies are following a formula-based method of calculating capital which includes solvency margin (varies with different products.) It is higher for the products which have higher guarantees but it’s lower for ULIPs.
Now, if you want to understand the nuances of different types of policies and its price, feel free to seek the help of InsuranceMall to select the right products based on your need.
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