5 life insurers see dip in solvency ratio

Hyderabad, March 8 Five out of 18 life insurers in the country have suffered a dip in the solvency ratio, a key indicator of the financial health of a company, in 2007-08, compared with the year-ago period.

However, all the insurers had complied with the stipulated requirement of a solvency ratio of 1.5, the Insurance Regulatory and Development Authority (IRDA) said in its annual report.

Among the five companies that had seen decrease in solvency ratio, Aviva Life Insurance Company Ltd led the list with sharp decline from 6.31 in 2007 to 2.37 in 2008.

Other insurers with moderate decline in solvency margins were Bajaj Allianz Life Insurance, ING Vysya Life Insurance, MetLife India and Tata AIG Life Insurance.

Under required solvency margins, every insurer needs to maintain an excess of the value of his assets over the amount of his liabilities of not less than an amount prescribed by the IRDA.

In the case of life insurers, the required solvency margin is the higher of an amount or Rs 50 crore. For general insurers, it is at Rs 50 crore or 20 per cent of net premium income or 30 per cent of net incurred claims, whichever is higher.

The remaining insurers, including Life Insurance Corporation, had improved their solvency ratios. The solvency ratio of LIC, at 1.52, was the lowest among all the life insurers.

Two newly-established companies, Future Generali India Life Insurance and IDBI Fortis Life Insurance had solvency ratios at 2.94 and 3.45, respectively.

Many companies, however, including Aviva Life Insurance, had infused capital after 2007-08 to increase their solvency ratio. “We have infused Rs 590 crore capital in 2008 in two tranches. As on January 31, 2009, Aviva is one of the best capitalised private insurers in the country with a paid-up capital of Rs 1,348 crore,” a source in the company told Business Line.

In the context of the current economic slowdown, insurers need to monitor their solvency ratios constantly, warns IRDA.

“The insurance companies may have to inject additional capital to maintain the regulatory requirements as they are being closely monitored by their solvency margins,” it said in the outlook for the industry this year.

Source:Businessline