Do not stipulate solvency ratio for public sector general insurers: Department of Financial Services
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The Department of Financial Services under the Ministry of Finance has urged other ministries not to include solvency ratio criteria to government owned non-life insurers to participate in the tenders for general insurance needs. This will enhance competition in the bidding process without compromising on the quality of services.
According to the Department of Financial Services, three government owned non-life insurers - National Insurance Company, Oriental Insurance Company and United India Insurance Company - do not have the stipulated solvency ratio of 1.5 of the liabilities. Some central public sector companies and government departments include the required solvency ratio as an eligibility condition in their tenders.
Pointing out that the insurance sector regulator has allowed forbearance to the three companies from maintaining the solvency ratio and allowed them to underwrite business. It mentioned ‘It is pertinent to note that the reinsured liability is not factored into calculation of Solvency Ratio, specified by IRDAI (Insurance Regulatory and Development Authority of India), as a result of which solvency ratio of 1.5 is very high from a risk perspective.’
