NEW IRDA MODEL TO GIVE LIFE COs GREATER FINANCIAL STABILITY

Life insurers will see more financial stability in their business, with the insurance regulator mandating them to adopt a new model to assess various risks and compute the capital needed to cover such risks from end-March, this year. The model, economic capital in technical parlance, allows insurers to factor in various types of risks- quantify them, and charge capital accordingly. The amount of capital that a company needs to earmark would depend on the type of business it underwrites. The capital requirement will be higher for products with a guaranteed return and lower for a product that has no guarantee like the Unit-Linked Insurance Plan (ULIP).